Ask Colin

PATTERN

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  1. Does it matter whether triangles are ascending or descending?
  2. Which patterns create the most volatile breakouts?
  3. What is happening when a V-Bottom forms in a market?
  4. Do you know of any books that explain the psychology behind chart patterns?
  5. I read your recent article (Shares August 2002) in which you described the candlestick reversal patterns "Hammer" and "Hanging Man". Are they buy and sell signals respectively?
  6. What do you think about the consistent patterns concerning seasonal trading (long Nov. through April) and US presidential cycles?
  7. Re your August 2001 article in Shares: In the three examples you used the symmetrical triangles appeared over a six to twelve month period. Can this behaviour occur over a much shorter period of time, say two to three months? For example I believe Tabcorp Holdings broke out of a symmetrical triangle in late January this year. I believe this triangle began in December 2000.
  8. 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.
  9. Regarding pennants and symmetrical triangles. I am uncertain as to the difference between the two. Is it that pennants are more likely to form in strong trends and are drawn above and below individual bars whereas triangles are 'larger formations' that may mark the end of a trend as well as a continuation?
  10. I am using point and figure charts and I was wondering if you have heard of or use the P&F charting advertised by Archer Analysis? It filters out stocks for double bottoms/tops amongst others.
  11. There is a conflict in the definition of a Dark Cloud Cover and Piercing Line reversal signals in two books that I am currently studying. To illustrate the difference I will use the Dark Cloud Cover. Louis Bedford emphasizes the body-to-body relationships and states that for the Dark Cloud Cover, the second black candle will open above the close of the first white candle, and then penetrate 50% or more. Greg Morris's definition is that the second black candle will open above the high of the first white candle, and then penetrate 50% or more. I currently live with this by accepting both but assume that Greg Morris's version of the Dark Cloud Cover is slightly stronger than Louise's version. However, it would be nice to know the rules before going on to break them.
  12. What is a Bear Trap?
  13. Something of interest, I have noticed what I think is a head and shoulders pattern on FHF dated the 13th of Feb 2001. The target pull back would initially be approximately $8.88 now that the neckline has been broken. What interests me is that the Coppock indicator gives a buy signal. On back testing the Coppock indicator, it certainly gives very reliable signals. My limited understanding tells me that after this pull back, FHF may very well re-establish a nice uptrend. I am not asking for trading advise, just your opinion. Perhaps the pattern is not a true head and shoulders.
  14. In your article "Technical Analysis - Basic Assumptions" November 1997, are you playing down the importance of historical trends/ patterns in predicting future trends/ patterns?
  15. Can you recommend a good chart pattern interpretation and probability book especially for Australian market?