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Made For TV Technical Chart Patterns
David Frost
October 25, 2023
⚾PRE GAME WARMUP
It's hump day already...
The overnight crew was busy conducting a pull back operation. This can go either way.
They can fail and start pushing down toward the recent lows. Or, they can continue the current formation of stair stepping their way in an upward rescue type operation, setting up for a squeeze operation...
We'll start with the pivot which comes in at [Login Here]. Above and Mrs. Market has an open pathway up to yesterdays closing price of 423.60 or so. Closing candles above is the bull case for the next leg higher, to be covered in a real time type formation as and if needed...
The flip side situation is getting below the pivot which opens the door for a test of [Login Here]. Just below is some unfinished business down around [Login Here] give or take...
Additional numbers will be posted on an as needed basis if they're in the failing camp...
🎬THINK IN PICTURES
The chart below is Natural Gas (NG). It’s been in the dumpster for quite a while, trying to carve out a low.
What happens if she starts to climb up the big monthly breakdown candle?
It’s called a short squeeze and NG could be at 4.60 or higher before you know it…
Let’s say they do that, the media would obviously be late to the party and notify everyone of the bull market at the end of the squeeze leg, right about the point in which it would come up short of $5.00 and pull back.
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💣RECKONOMICS
Isn’t this what we’ve been saying for years?
We’re not going to rehash the entire schematic of the economy and interest rates, but worth while to simply recognize confirmation and redemption when we see it.
It’s not every day we get one of the most widely known and popular CEO’s to agree with what’s been written in these pages, is he a subscriber too?
🩺PSYCH WARD
The case for big and small.
Time is more important than price, how we use it is an art form rather than a science.
In Tuesdays Live Trading Room we had a great discussion about Head & Shoulders Patterns, including one that emerged yesterday. One of the traders identified an Inverse H&S Pattern on a short 10-minute intraday time frame. This would be a pretty bullish development if triggered. Mrs. Market started closing some short term candles above the neckline getting some traders all excited…
The lesson was focused on which time frame we should be looking at since you could see the same pattern on an hourly chart.
Here’s the way it works. Until or unless price closed above the trendline on an hourly close, it’s not activated. It did, however the next hour it closed right back inside, negating the pattern and wiping it off the table just like the one from the regular way H&S pattern on the SPY daily chart from a few weeks ago…
When price began closing some short term candles above the neckline traders were tempted to “hop on” for the ride. However, the next hourly candle dropped right back below, negating the pattern with the real possibility of faking out many traders.
It’s very important to look at all the time frames to get the whole picture of the market and confirm what you see in the short run is actually happening on the larger ones.
We also discussed another little know fact. Most of the identified head and shoulders patterns fail, leaving traders with that “deer in the headlights” look when price doesn’t do what they thing it's going to do.
They’re made for TV…
🏆MEMBERS SAYIN’
Learning patience and waiting for the price we want has been a game changer in my trading, can’t thank you enough. Tom M.
Today was the best trading day I’ve had in several years thanks to you David. Bob C.
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DISCLAIMER STUFF: Nothing found in this communication is financial advice. This newsletter is strictly educational and not intended for or should be thought of as investment advice or a solicitation to buy or sell any assets or to make any financial decisions whatsoever. Please be careful and always do your own homework.