Day 5: Tight Wedgie

Setups come in all shapes and sizes. We’ve seen wide ranges, but here is an example of a tight wedge. For five excruciating months, the price was bound within a two dollar bandwidth.

We can see the remnants of a bullish trend before the base of the wedge starts to form in February 2012. Let’s make things a bit easier and draw in the lines to accentuate the perimeters of the triangle. The first thing I notice is how crisp prices adhere to the boundaries. While no closing prices touch the supporting trendline, we can see (via candlesticks) how the lows of the bars touch and promptly return within the range.

Five months to cover two bucks

The more I look at this chart, the more I’m taken by the clean, crisp, simplicity of the price candlesticks. I like my candlesticks for nothing more than to have a quick visual representation of what’s going on behind the scenes. I’ve circled and enlarged the brief penetration of the wedge in May 2017. While price did breakout prematurely from the wedge, the clear bearishness of the price bar should make us a little reserved for a bullish follow-through.

What also adds to the cake is that the shadow still manages to touch the supporting trendline. The bears clearly didn’t want to break the price out of the wedge, but they still respect the supporting trendline!

Thankyou candlesticks for showing us the bearishness of the breakout candle!

Even the breakout from the apex was textbook: a substantial price bar pierces the apex with following bullish fever carrying the price higher. What makes this trade even easier is the emergence of a trendline from the breakout price. All we have to do is watch for chances to take profits.

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