Ask Colin

I look forward to reading your articles in Shares monthly magazine and I have learnt a great deal from you. However, can you please clarify the following question for me; when drawing pattern formations on charts, should the pattern be drawn from closing prices or intraday prices? I have noticed that generally the same pattern formation appears whether it's drawn from closing or intra day prices; however, if you look at CPU (1 year - daily) chart, it appears to me from intra day prices, that a possible symmetrical triangle is forming, but if you look at the same chart, with closing prices, it appears to me there is a mini trend break and a possible upward trend forming.

Chart patterns are usually identified on bar charts. The textbooks tend to use daily or weekly bar charts. There is no reason why they should not appear on intraday charts. I have seen some examples over the years, even though I do not have intraday data myself.

This is my daily bar chart of CPU:

Personally, I think that identifying this as a triangle is very speculative. However, it may look clearer on your intraday chart. I doubt it though because the daily highs and lows will not change and there is only the slightest tendency for the range of the swings to contract. I see it as simply a trading range in a clear downtrend. I would expect the eventual breakout to be down, but there could be a good rally if it breaks out upward.

This is a discussion of the idea of a triangle on a specific chart only. It does not in any way recommend that you trade this chart either way.

Keyword: