# Descending Triangle Breakouts - My World



## Dutchy3 (6 April 2007)

Hi All

Thought I'd publish a series of trades and the set ups I look for.

For want of a better description I call them descending triangle breakouts. This is the only pattern I ever look for and routinely occurs in daily, weekly, monthly charts.

What I believe is happening is that patient buyers, represented by the horizontal blue support line, are allowing sellers to exhaust themselves, the sloping red line.

I need to see at least two attempts at a rally, points 1 and 2, with failure.

The entry signal is always a white candle breaking into new air. Confirming volume on the entry day, week, month is great to have too, although not mandatory.

I'm basically looking for a controlled constrained market who's tightening ends in violence, the breakout signal.

I have variations that I allow through experience over the years ...

More to come ...

Feel free to post any charts that could be discussed.


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## It's Snake Pliskin (6 April 2007)

Dutchy I have been reading your posts and like your style. Simple but effective. What is your strike rate? Success failure of this method?


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## Dutchy3 (6 April 2007)

Snake - on a weekly set up better than 65% and the really good thing is that when I'm wrong STOPs are tight. The quality of the breakout signal often is a precursor to actual success. I have a weakness of being cute at around mid-day entering some positions only to see it sell off on the CLOSE. I need to wait until the last 10 minutes of the day, week, month in order to raise my confidence levels in this respect. 

Daily charts I need to be much more circumspect in that I still need to be confident that the weekly trend in still bullish. Don't want to be suckered into a stage IV stock ... which has happened ...

Its the potential for % return verses the risk on entry that keeps me just focused on this one pattern. AGM has returned 400% is little over 12 months and prior to that LHG nearly 250% ... I took a position in ABY during the week so lets see how that goes ....


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## It's Snake Pliskin (6 April 2007)

Dutchy3 said:


> Snake - on a weekly set up better than 65% and the really good thing is that when I'm wrong STOPs are tight. The quality of the breakout signal often is a precursor to actual success. I have a weakness of being cute at around mid-day entering some positions only to see it sell off on the CLOSE. I need to wait until the last 10 minutes of the day, week, month in order to raise my confidence levels in this respect.
> 
> Daily charts I need to be much more circumspect in that I still need to be confident that the weekly trend in still bullish. Don't want to be suckered into a stage IV stock ... which has happened ...
> 
> Its the potential for % return verses the risk on entry that keeps me just focused on this one pattern. AGM has returned 400% is little over 12 months and prior to that LHG nearly 250% ... I took a position in ABY during the week so lets see how that goes ....




Dutchy,

Nice work. 

You mention a stage iv stock. Whose school of thought is that? The stages? 
I am in EW land at the moment and my brain is tired Distributing stock.

The trendline appears to be subjective but logical. Are there any rules determining the placement of it?


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## Dutchy3 (6 April 2007)

Yes ... Weinstein _Profits in Bull and Bear Markets_ and Bedfords _CandleStick Secrets_ talk of share stages. Very macro view ... keeps me out of trouble though. EW within each stage.

Look at the attached unfolding CMO. Points one and two black weeks and absolute textbook locations. Increasing volume on the breakout ... all my entries are looking for at least two failures with success on the third attempt. Bit of Gann in that me thinks.  The longer, flatter and more % volatility within the triangle seems to generate more power on the breakout and rapid SP increase consequently.


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## IFocus (6 April 2007)

Hi Dutchy 

Thanks for posting the thread

How do you define your exits?

Focus


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## clowboy (6 April 2007)

Dutchy3,

You say the attached unfolding CMO.  Hasn't it already unfolded?

Are you still in this stock?  Personally I think that CMO has turned a bit bearish.  Lows are now being followed by lower lows.


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## Dutchy3 (6 April 2007)

Exits for me are when the stock CLOSES below the most recent big white into new air.

So for CMO its the week ending 23/02/07 and the price .02.

The real issue for me with exits is opportunity cost. For the past 6 weeks CMO has traded sideways. What would of been the next best allocation for my capital tied up in CMO that could of been allocated to something else that was running?

This is the allure of the market ...


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## CanOz (6 April 2007)

Great posts Dutchy, i've been wondering how this has been working to you too. Do you scan for these setups?

Cheers,


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## RichKid (6 April 2007)

This is a very interesting strategy Dutchy, thanks for sharing and congratulations on doing well with it. I look for bases like the ones you appear to be trading, would this be an accurate description, search for accumulation and the final breakout once supply dries up? Tried similar patterns like saucers and box consolidations but never with the specificity that you show here. Keep it up!


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## tech/a (6 April 2007)

Dutchy.

These are an excellent setup. Preceeding often good sized moves.
Excellent R/R.
I'm suprised at a 65% hit rate but as can be seen by the examples even a much lower hit rate would return good profit.

Do you have an M/S formulas which flushes these out?


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## Dutchy3 (6 April 2007)

Hi All

For a long time I've tried to find MS scans that will simply flush out these set ups .... to no avail. I buggerised aroung with ADX, swings, zig zag - just about everything. Its actually quicker just for me to look at all the charts with sufficient liquidity.

I have a daily and weekly routine that helps.

A - Filter all stocks with an average daily value greater than $300,000 for the past 50 days (As I now use CFD's I want at least this level of liquidity)

Then, from this subset 

B - Show Big Whites - daily

Then same at end of week B - Show Big Whites - weekly.

This will at least flush out those stocks that performed...

Really as I'm really only interested in the top 10 - 15 % of the market this is 250 - 350 stocks. As the set up's I look for take weeks/months to form up as long as I look at each of these 250 - 350 once a month I see them form ... then I wait. If they don't behave and I delete them.

MOS, CUE, Oxiana, NDO, MCC, GDN (see separate post as this one moved a week or so ago) are current watchlist stocks. Then I make sure I'm comfortable with the FA position and all the announcements that are in the market.


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## nizar (8 April 2007)

Seems like a great strategy Dutchy,
Thanks for sharing.

You mention hit rate 65% (impressive), what about R/R ?


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## Dutchy3 (9 April 2007)

Hi Nizar

Always an issue for me. R/R if the position works is generally good. For example 10 -15% entry risk followed by 50%+ return. What I tend to do is (try) to stagger entries. By taking (say) a third on the entry day Close and the second third the following morning if the open is positive. Then the rest of the position in a day or two's time ...

Great in theory ... generally the best ones force me to chase the market, which is un-nerving, but tend to produce the better results in the end. 

I used to follow the 2% of total capital rule ... only trouble is that I've found that if I get really aggressive with the ones that confirm powerfully early returns increase dramatically ... still I've also had some wicked reversals and paid a high price ... in all this is an area I could focus on more ...


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## Chorlton (19 April 2007)

Dutchy,

Nice strategy & Thanks for sharing on here...

Can I share a couple of observations....


1. Just off the chart to the left was the price in a downtrend prior to the set-up? If so, then this could be seen as a double / triple bottom. 

2. I like your use of Volume to confirm the break-out.

3. You mention Risk:Reward. Do you have a minimum R:R and if so, how do you calculate in advance where you will exit the trade with profits?

4. The moving red line looks like a specific MA. If so, what value do you use, on what time frame do you look at it, and do you also look for the SP to rise above it before entering the trade?

 ie Using it as a confirmation tool to trade in the direction of the main trend?


Thanks in advance,

Chorlton


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## Dutchy3 (22 April 2007)

1. Just off the chart to the left was the price in a downtrend prior to the set-up? If so, then this could be seen as a double / triple bottom. 

 OK

2. I like your use of Volume to confirm the break-out.

3. You mention Risk:Reward. Do you have a minimum R:R and if so, how do you calculate in advance where you will exit the trade with profits?

 No ... I just follow the market ... where I do let myself down is not seeing a trend through to completion ... always looking for the next big one and leaving $ on the table

4. The moving red line looks like a specific MA. If so, what value do you use, on what time frame do you look at it, and do you also look for the SP to rise above it before entering the trade?

 30 ... and the SP will always be above this when I enter ... regardless if daily or weekly

ie Using it as a confirmation tool to trade in the direction of the main trend?


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## Chorlton (24 April 2007)

Dutchy3,


Thanks for your comments........


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## CanOz (8 June 2007)

How does this qualify Dutchy?


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## It's Snake Pliskin (8 June 2007)

CanOz said:


> How does this qualify Dutchy?




Can,

Where is the trend line?


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## dlineinvestor (9 June 2007)

PDN

PDN is in a descending triangle and looks like it will be there until late June. Unless a breakout occurs, current sentiment may not lend it self to that view, but definately some energy being built up in there.


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## CanOz (9 June 2007)

It's Snake Pliskin said:


> Can,
> 
> Where is the trend line?




Here it is, but its and acsending Triangle...looks so different on Amibroker...Bigcharts has totally different prices from April to May too.

Strange?

Cheers,


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## Dutchy3 (9 June 2007)

Hi 

Nup does not qualify ... upsidedown

Look at my MOS, CUE, NDO, CMO posts


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## nizar (9 June 2007)

Dutchy3 said:


> Hi
> 
> Nup does not qualify ... upsidedown
> 
> Look at my MOS, CUE, NDO, CMO posts




Hi Dutchy.

Is there a specific reason you dont trade ascending triangle breakouts?

(I personally find them very profitable, MPO was textbook since the break at 10.5c.)

Do you think descending triable breakouts to be higher probability trades?

Id be keen to hear your thoughts.


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## Dutchy3 (9 June 2007)

Hi Nizar

Yes ... in my experience.

What I'm looking for is patient buyers and exhausted sellers. Let me illustrate by way of example.

The attached CMO chart is a recent example. Buyers sat at 007 for 18 months and let the sellers actually exhaust themselves at points 1, dumping stock.

By the time point 2 arrives, and the volume kicks in, the sellers are buggered. They literally no longer exist and hence the explosive move as NEW HOLDERS of the stock scramble with each other to get what little is left.

With an ascending triangle its actually the reverse. The buyers do all the work running up to overhead resistance while patient sellers smack them down. If a breakout does occur the buyers have to be relatively more abundant to keep the run going ...

As an aside these two patterns do tend to form at different points in the cycle in a stock ... Decending Triangles can form up during Stage I and form lovely bases - returns 100% + are typical. Ascending triangles tend to form when a stock is already in Stage II. The bull run is taking a pause and some sellers just sit and take out the top of the market as it rallies up. When these triangles are successful the triangle tends to be just a pause in an overall run.

In terms of profitable positions I find the entries in Stage I the most rewarding and most predicable (volume cues a major comforting factor)

I can find examples where the opposite is also true ... such is the market.

When I post a predictive chart (NDO, CMO, ABY, WPL, CUE recently examples) each one I posted as the breakout was occuring and each one .... exhausted sellers ... patient buyers. It's in this way I can get so cocky and post for all to see.

Never discount BIG WHITE weeks with heavy volume into NEW AIR either ... and that's another story.


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## nizar (9 June 2007)

Dutchy3 said:


> Hi Nizar
> 
> Yes ... in my experience.
> 
> ...




Thanks for that response.

I'd be keen to know where your exit with CMO was, and your exits in general.

Look at the attached for the MPO ascending triangle breakout.


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## nizar (9 June 2007)

By the way i just checked NDO i presume your referring to the late March descending triangle breakout. 
Nice one...


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## nomore4s (9 June 2007)

Hey Dutchy,

Does this one conform to your set up? Is there any other criteria you use?
Does it matter that SEK has had a strong run up in the last 2 or so years? ie Well and truly in stage 2


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## nizar (9 June 2007)

nomore4s said:


> Hey Dutchy,
> 
> Does this one conform to your set up? Is there any other criteria you use?
> Does it matter that SEK has had a strong run up in the last 2 or so years? ie Well and truly in stage 2




Looks like a stage 3 to me on the daily.


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## CanOz (10 June 2007)

Nizar or Dutchy or NOMORE4s have any of you coded up a scan for these in either MS or AB?


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## nomore4s (10 June 2007)

nizar said:


> Looks like a stage 3 to me on the daily.




I suppose thats what I asking, has a good chance of breaking down imo. But I suppose if it breaks up all good and if it breaks down don't go near it.



CanOz said:


> Nizar or Dutchy or NOMORE4s have any of you coded up a scan for these in either MS or AB?




No I haven't but I know someone posted one up in one of the threads, maybe the entry thread, I'll see if I can find it and post it here for you.


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## Dutchy3 (10 June 2007)

Hi Nomore4

I agree with nizar ... this stock is in a bull run and is pausing ... The big white with arrow is on 150% of 50 period average volume as well and dominating the price since. A close below this white and I'd exit long. Else hold for a resumption of the bull run.

So this is in stage II (at least could be stage III ... no evidence yet).

A big white closing up around 800 would be confirmation to hold long. Entering long fine too with STOP's around 700 ... wait for the signal week though.

The closest I come to writing code in MS is to look for BIG WHITES, HIGHER VOLUME THAN AVERAGE, TOTAL AVERAGE TRADED > $300,000 PER PERIOD.

This narrows me down as CFD's not offered on whole market + liquidity issues anyway etc etc


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## nomore4s (10 June 2007)

CanOz said:


> Nizar or Dutchy or NOMORE4s have any of you coded up a scan for these in either MS or AB?




Try this cana, post 22, thanks to Peaky.

https://www.aussiestockforums.com/forums/showthread.php?p=159415#post159415

Hi Dutchy,

Here's my AmiBroker code that flags my possible Weinstein trades. It generates about 10 buy signals a day. At the moment I'm just using MACD as the exit.

**********************************************

// WeinsteinScanner v2 amibroker version
// here we define buy conditions and name each one as a variable
PositionSize = -10; // always invest only 10% of the current Equity 
Cond1=Volume > 1000000;// Volume greater than....
cond2=H > EMA(C,15); // todays high is greater than the 15 day Exp MA of closes
cond3=C < 3.00; // only trading in stocks less than $3
cond4=C > O; // todays close higher than open
cond5=HHVBars(H,150) == 0; // highest high over the past 150 periods
cond6=C > .01; // only trading in stocks greater than $0.01

// the following line is the trigger if all conditions satisfied
Buy=cond1 AND cond2 AND cond3 AND cond4 AND cond5 AND cond6;


Filter = Buy; // lists exploration results conforming to our buy criteria
AddColumn(Buy, "buy", 1.0); //


//SELL
// ApplyStop( stopTypeLoss, stopModePercent, amount=10 );
// fast = Optimize("fast", 12, 5, 20, 1 ); 
// slow = Optimize("slow", 26, 10, 25, 1 ); 
// Sell=Cross(Signal(fast,slow),MACD(fast,slow)); 


// shape = Buy * shapeUpArrow + Sell * shapeDownArrow;
// PlotShapes( shape, IIf( Buy , colorGreen, colorRed ), 0, IIf( Buy , Low, High));

**********************************************


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## legs (10 June 2007)

I believe after reading some of your posts and a little reading on bollinger squeezes, I find this stock appealing to me. NDO, one of your mentioned watch list stocks. It is definately squeezing tightly and hope it breaks up... Any comments welcome as I am very new to this and maybe I am reading to much into it??


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## Wysiwyg (10 June 2007)

legs said:


> I believe after reading some of your posts and a little reading on bollinger squeezes, I find this stock appealing to me. NDO, one of your mentioned watch list stocks. It is definately squeezing tightly and hope it breaks up... Any comments welcome as I am very new to this and maybe I am reading to much into it??




Legs .. . My view is that although the chart signs are there , on any given stock it does (sometimes) depend on progressive news to move the price in the expected way.I see many stock that show all the signs but without any news for encouragement or despair the price will languish.My example is NRU which produced a cup and handle but without any progress details has declined slowly.

This decline is related to the (a)ones holding tight waiting for the inevitable uplift and (b)the ones that patience and percentage decline is unacceptable so they sell.

I suppose it comes back to which come first , the formation or the fundamentals.


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## nizar (11 June 2007)

Dutchy.
You may wanna take a look at MDL.
Not a breakout yet. But looks prime
Just needs to break $1.40 on a bit of volume and i mite even be joining you.


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## CanOz (11 June 2007)

nomore4s said:


> Try this cana, post 22, thanks to Peaky.
> 
> https://www.aussiestockforums.com/forums/showthread.php?p=159415#post159415
> 
> ...




How do i get your sell to work? After i take out the comment markers it keeps giving me syntax errors, need semi colon etc etc. It says i need to initalise the SELL...shows you how bloody far i've got to go with this

SELL=......that did it!


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## Dutchy3 (11 June 2007)

Hi Nizar

MDL ways to go yet ...

Try closer look at Webjet, SGL (lots of nice white candle accumulations), ARW, 

I'm fully invested with a gearing of 1 : 3.5-4.0 so not much room to move.

Look at weekly charts


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## Dutchy3 (11 June 2007)

Hi Legs

NDO not on watchlist ... I have open positions now with STOP's from 27 ish. Bought back in early April as it started to break higher ... this needs to hold 27 for me to stay long


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## nizar (13 June 2007)

Dutchy.

How about URA if we get a white candle on volume?


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## tayser (13 June 2007)

Thanks for sharing you thoughts Dutchy, been following this thread a fair bit, as I'm very much a beginner and am finding this strategy somewhat easy to relate to... just to throw a stock in to the ring re: your thoughts: ENG in the past two days?


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## Dutchy3 (13 June 2007)

Hi

ENG and URA can't really see it ... both appear to be in a down trend .... I'm very fussy

Ran my nightly scan and can up with these ....

As an aside the best one's I see from todays close is IGC at 39 STOP 32, MLM at 95 STOP 85, watch MPS for a better close tomorrow, PKT same, RMG crazy what's that one all about?, WES for a higher close tomorrow.

Each has a better than average chance of being higher in the future ... beyond that it comes down to MM ...


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## JeSSica WaBBit (14 June 2007)

Love your work Dutchy,

Thanks for sharing this information, really enjoyed reading this thread and the information you have posted.

Nice one


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## Chorlton (14 June 2007)

Dutchy3 said:


> Hi Nizar
> 
> By the time point 2 arrives, and the volume kicks in, the sellers are buggered. They literally no longer exist and hence the explosive move as NEW HOLDERS of the stock scramble with each other to get what little is left.




Hi Dutchy,

With ref to your quote above, would I be right in assuming that you would immediately buy the breakout rather than wait for a pullback?

PS. Do you only use Weekly charts, or do you drop down to Daily to time your entries???

Kind Regards,

Chorlton


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## legs (15 June 2007)

On a bigger stock, ASX.AX, could this possibly be in for a descending triangle breakout??? I cant seem to get my chart with the triangular lines to save on my PC, so couldn't post it.. although i do notice it hasnt really rallied twice, as the first peak was an original high... white candle happening today though...


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## doctorj (15 June 2007)

Not sure ASX qualifies yet.  Refer to the attached chart.


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## Dutchy3 (15 June 2007)

Hi Everyone

ASX - nup 

Chorlton - I buy the close of the day of the breakout ... never wait for a pull back because the best stocks don't. I tipped WES a few days ago and is now a case in point on the close this week. I do trade the day chart if the weekly is showing signs ... typically I'm entering on the close of the breakout day ... perhaps with a 1/3 size position ... then on the close Friday, if the market is moving away I get very aggressive in the last 1/2 hour or so and load up ... 

Another point that is usefull is to undersatnd that software packages average the look of the chart. I tipped CMO at Xmas time as it was moving.

Look at a weekly now and it's obvious ... so those studying these breakout using your own software don't load a current chart ... look at the chart as of the date of the breakout because they do not look nice and neat like they do 6 months down the track


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## doctorj (15 June 2007)

You make a good point - people are very good at reading historical charts and justifying why things happen like they did. 

Things are never quite as clear at the right hand edge...


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## chops_a_must (15 June 2007)

Not sure if this has been answered or not, but just wondering what the parameters for exits are, based on your system?


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## Dutchy3 (16 June 2007)

Hi Chops

No sorry missed it.

Here's CMO by way of explaination ...

See point (1), first reaction so ignore ...

Referred the CMO thread at this point, there where a few comments about exiting ... I find these predictable enough to hold for the first and let the panic sellers do their thing...

Point (2) far more interesting. Not really a reaction down, rather a few weeks of sideways before the BIG WHITE into NEW AIR this past week. Now a BLACK into this zone, especially on heavy volume (> 150% of the 50 period average) would have me selling too. ...

I suspect that CMO has more in it yet ... if it BLOWS OFF, I'd be tempted to unload a portion too ...


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## zuluwarrior08 (16 June 2007)

very new to this, must thank you dutchy for a great thread... can i ask someone to direct me to some learning/reading about stage II stage 3 etc please?

thanks very much


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## Dutchy3 (16 June 2007)

Hi Zulu

Try Bedford's 'Secrets of Candlestick Charting'. Very simple concept explained very simply.


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## Dutchy3 (16 June 2007)

Snake asked me what the returns are like using this method ...

Here's an extract of the last 10 stocks I've picked and posted on this forum on the date of the signal day / week ...

Then it's all down to MM to make sure when I'm wrong those one are cut quickly so they don't drag on my capital

 Stocks Picked and Published on Aussie Stock Forums 							

	Date Picked	 Price Picked 	Date Now	 Price Now 	Gain / Loss	%	Annualised %

 CSM 	28-March-2007	 $2.4900 	16-June-2007	 $2.630 	 $0.1400 	6%	25%
 ABY 	04-April-2007	 $2.4300 	16-June-2007	 $2.780 	 $0.3500 	14%	71%
 CUE 	17-April-2007	 $0.1550 	16-June-2007	 $0.210 	 $0.0550 	35%	213%
 BTA 	28-April-2007	 $1.7200 	16-June-2007	 $1.670 	-$0.0500 	-3%	
 DJS 	28-April-2007	 $4.8700 	16-June-2007	 $5.200 	 $0.3300 	7%	50%
 GTP 	09-May-2007	 $2.2000 	16-June-2007	 $2.810 	 $0.6100 	28%	262%
 ICP 	13-May-2007	 $0.0650 	16-June-2007	 $0.076 	 $0.0110 	17%	178%
 RIV 	16-May-2007	 $2.2300 	16-June-2007	 $2.800 	 $0.5700 	26%	295%
 MOS 	28-May-2007	 $0.1650 	16-June-2007	 $0.185 	 $0.0200 	12%	225%
 APA 	03-June-2007	 $4.4700 	16-June-2007	 $4.260 	-$0.2100 	-5%

Two are a concern ... the rest are OK


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## alankew (16 June 2007)

Dutchy that is a truly amazing performance.Have you done this in a bear market and if so how does the performance compare.Always look out for your posts as when you illustrate them they are incredibly easy for us beginners to understand-Love your work and heres hoping you keep helping the rest of the forum.Al


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## Dutchy3 (16 June 2007)

Hi AK ... what's a bear market? LOL I've been at this since 1998. At Uni in 87 so that was just a bit of a giggle ...

Answer is no ... I've tried SHORTS over the years and not had the success I've enjoyed with LONGS ... 

The coming months are shaping up to be shaky as momentum is running out of the XJO so really have to be very fussy ... the oliers have it for me at the mo


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## Chorlton (16 June 2007)

Hi Dutchy,

Thanks for your earlier reply ...

When looking for new potential chart set-ups, do you "eyeball" each chart or are you using some form of scanner to find these early set-ups??  

... And out of interest, which markets do you target?

Thanks in advance,

Chorlton


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## Dutchy3 (16 June 2007)

Hi Chorlton

Yes .. eyeball.

I use CFD's so top 400 - 500 stocks would see me out ... I use MS and so have an exploration that gives me stocks with period average of > $300,000 and this seems to suffice.

As long as I look at each chart once or twice a month (weekly chart) I see the set ups form.

Finding them is easy ... waiting for them to prove themselves can be a challenge for me as I'm one of these people that equate activity with work ... in the market nothing could be further from the truth ...


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## nizar (16 June 2007)

zuluwarrior08 said:


> very new to this, must thank you dutchy for a great thread... can i ask someone to direct me to some learning/reading about stage II stage 3 etc please?
> 
> thanks very much




STan WEinstein - Secrets for profiting in bullmarkets and bearmarkets.


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## jammin (17 June 2007)

Hi Dutchy, Thanks for the thread and all the information you have shared.
Attached is a descending triangle forming in KIM. The breakout would appear to not meet your entry criteria as the day of breakout and subsequent days are not strong white candles though the volume kicked up a bit. Any comments?


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## Dutchy3 (17 June 2007)

Hi jammin

Yes ... downtrend line far too steep ...

Also trading below the 30 week moving average so never going to be on my radar for a long entry ....

Interestingly KIM could actually be finding a bottom. Not a Decending Triangle though. Be very circumspect and let the chart tell its own story ...


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## zuluwarrior08 (17 June 2007)

Dutchy3 said:


> Hi Zulu
> 
> Try Bedford's 'Secrets of Candlestick Charting'. Very simple concept explained very simply.






nizar said:


> STan WEinstein - Secrets for profiting in bullmarkets and bearmarkets.




Thanks very much guys. much appreciated. Ive been reading this forum for the past weekend and must say am so glad Ive found it. Its been really hard to find people who are interested in trading/shares etc. and I think this is how I might be able to surround myself with like minded people. Not to mention how much Ive learnt just reading these threads. 

Dutchy I use a very similar method, except I also use shares that are trading in a horizontal resistance and support levels. I trade CFDs too and find it allows me to have extremely tight stops, if the defined support is broken then I know ive made a mistake. Im still learning plenty and only using very small amounts of capital.

Anyway, thanks again guys. Looking forward to more posting and learning.
Bryan


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## Dutchy3 (18 June 2007)

_Hi Chorlton - reply follows PM_

***********************************************
Hi Dutchy,

I hope you don't mind me emailing you but after reading your above thread, I wanted to ask you a few questions about your approach.

Firstly, I'd just like to say that I definately like your set-ups as it encompasses the elements of trading that I think are vital for making consistant profits such as the abilility to read the Price / Volume relationship and using this relationship to find low-risk entries.

From what you have kindly posted on the thread, your "rules" seem to be:

1) Look for set-ups forming within Stage 1. 

Would you consider looking for "reversed" patterns within a Stage 3, with the intention of shorting? The reason I ask is that you mentioned that you would like to trade more frequently if possible.

_The LESS frequently I enter and exit positions the better - I'd rather the market do the work that jump in and out - still $$$ has a time value as well and not prepared to have my capital just sitting_

2) Enter above the weekly 30MA

Is there any reason, why you have chosen 30 or is it simply to indicate the direction of the underlying trend?

_No real reason - Bedford used it and makes sense to me re share stages_

3) Average Daily of > 300,000 

Are you referring to Volume here? The reason I ask is that some of the charts posted seem to have lower volume.

_Share volume is irrelevant ... this meant value $$$ - I'm looking for the big money flows so always calculate VOLUME * CLOSE_


4) Staged Entry --- Buy 1/3 before the breakout, 1/3 next open and 1/3 within a few days.

Based on this approach, am I right in assuming that you are trading during the day? Or are you placing buy orders in advance with your broker?

_Right at EOD only - don't use a broker - straight through software, although I need to take a few bites sometimes to get the position I want_

5) You mentioned in a previous post that you use Stochastics, and MACD for confirmation.

Are these indicators always considered, as I noticed that a lot of the charts posted do not include all these indicators.

_No - prefer a chart with as little info on it as possible. I do use the MACD to stay in a position (time value of money again) but never to enter, or exit if the price and volume action dictates_

6) Being a discretionary approach, have you been able to carry out any form of Back-Testing to confirm the "hit / win" rate with this break-out approach, or are your stats based on actual trades? 

_Have a look at this post. The last 10 positions I published on this forum are doing OK. 8 out of 10 now in profit and still running - losses must be cut to stay in the game and MM turns 8 of of 10 into 200%+ pa or results in blood on the floor_

Finally, you mentioned that the only MS exploration you use is to find Great White's with increased volume. With this scan, wouldn't you be missing the initial break-out??

_Yes ... no great shakes, I don't need to hit every stock that moves ... just the ones that will return me 100% + pa. Missing the actual day / week is OK just buy on the open the next day / week. Please remember its MM and position sizing that run up the capital not the win/loss ratios _

Out of interest, have you considered scanning for price ranges? I am running a couple in my software program that looks for tight ranges (2% & 3% Price range).

_Yes ... at the EOTD all I need to is actually LOOK at the charts/markets I'm interested in once or twice a month and that's all the scanning I really need. Don't discount the posters on this forum either ... SLA is a classic I remember pacer loved it ... I looked at it and also ticked the TA boxes for me ... stated it was a buy and its now up a couple of 100%. There are plenty of posters here that really do know what they are doing ..._

Apologies once again for the long email and thanks in advance for any insight you can offer.......

_Pleasure there is enough $$$ in the ASX to give those that do the work all the cash they will ever need_


All the best,

Chorlton

PS. Keep up the great posts !!! 
__________________


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## zuluwarrior08 (18 June 2007)

Good last post Chorlton/Dutchy.

Dutchy can you expand on how you stay in trades using the MACD please?


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## Dutchy3 (18 June 2007)

Hi Zulu

See the CMO chart ... the little blue lines at the bottom ... while they stay in positive territory I'd be looking to stay LONG ...

That been said if the stock reverses through a support point suddenly or drifts for too long I'd probably lighten up my postion ...

That been said ... if there was not a better opportunity elsewhere I'd be tempted to remain with the position ...

I am mostly driven by the price and volume action though .. that's what triggers my entries ... the MACD really just provides a warm fuzzy feeeling for remaining in a position ...

After 10 years I believe I've also developed an 'intuition'. I had AUZ way back when it was bouncing along in the ruff and doing nothing ... the moment I sold out of them I knew i was being short sighted ... I had quite a few of them too ...

Since then I've left 400%+ on the table in 9 months (I think its that much ... not in front of my system now) which would of been many multiples of $10K ...

So while my 'system' looks mechanical ... its not


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## Chorlton (18 June 2007)

Kennas,

As always, Thanks for the detailed reply.....  

If you don't mind though, just a couple of further questions: 

1. "The LESS frequently I enter and exit positions the better - I'd rather the market do the work that jump in and out - still $$$ has a time value as well and not prepared to have my capital just sitting"

Out of interest, as you're trading CFD's, wouldn't exiting and re-entering a position save on potential interest being incurred?

2. With regard to the BackTesting question, I was just interested in whether you had carried out any form of backtesting / paper-trading before you began to trade this strategy with real $$$, way back when you started? 


All the best,

Chorlton


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## Dutchy3 (19 June 2007)

Chorlton said:


> Kennas,
> 
> As always, Thanks for the detailed reply.....
> 
> ...




The interest rate on a CFD is around 7 - 8%pa - without trying to be too cute I fully expect to make 30%+ pa on my positions .... so yes CFD's are probably too expensive to 'invest' in .... I do however hold positions for months and don't really have an issue ... also some CFD's offer 1% margin so the levergae verses cost of finance is quite good

I started with Safety in the Market and also picked up Bryce Gilmore's stuff in my early days. Never really paper traded though


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## Chorlton (19 June 2007)

Dutchy3 said:


> without trying to be too cute I fully expect to make 30%+ pa on my positions




Thats not being cute..... Afterall, thats a nice return for a low-risk entry 

Reading through the previous posts, you mentioned:

"Another point that is usefull is to understand that software packages average the look of the chart"

Can you expand on what you mean by this?  I'm assuming you're not talking about potential differences in "Data" between vendors.... 

Also, after a breakout, am I right in assuming that you would ignore the first pullback / correction, when placing a trailing stop? If so, do you check volume during the correction just as a confirmation??

Cheers...


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## Dutchy3 (19 June 2007)

Chorlton said:


> Thats not being cute..... Afterall, thats a nice return for a low-risk entry
> 
> Reading through the previous posts, you mentioned:
> 
> ...




Charts in six months time look different from what they do today ... so in hindsight a breakout that occured 6 months ago on a chart is easy to spot ... no skill in that ... always load data as of the date of the breakout when reviewing so you get to know what a breakout looks like as is happening.

A decent breakout will have its first pull back well clear of my entry so I can afford to let it play out .... yes i watch volume and if the volume RISES on any pull back I would also be counted with the sellers .... as an aside ANY BLACK candle on heavier volume should be treated with a great deal of respect .... these tend to be more significant than similar WHITES ...


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## JeSSica WaBBit (19 June 2007)

Hey Dutchy,

How often do you see the descending triangles breakout after:

Two descending triangles (your default):
Three descending triangles:
Four descending triangles:
Five descending triangles:

Percentage for each if you wouldn't mind.

Obviously you have calculated through experience that you need to have two failed attempts before the BIG WHITE typically kicks in with volume to signal your BUY, just wondering how often they continue before breakingout?

Also, of those that you have got wrong, what has been the trend 3, 6 & 12 months later. Have you had time to investigate this and do these typically continue to fall or do they rebound?
Or, have you seen them fall to a new support level then begin to form up at that level before breaking out?

JW


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## Chorlton (19 June 2007)

Hi Dutchy,

Out of interest, do you also consider the price range of the stocks which you choose to trade?  ie. Is there a Minimum or Maximum price you would consider, or do you just look at the chart dynamics for making a decision?

Thanks... Oh... and apologies for the ongoing questions..... 

Kind Regards,

Chorlton


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## Dutchy3 (19 June 2007)

JeSSica WaBBit said:


> Hey Dutchy,
> 
> How often do you see the descending triangles breakout after:
> 
> ...




Hi JW ... any more that 2 - 3 failures and the breakout is unlikely to occur ... ie the stock keeps falling in price .... % of each .... too much like hard work, and for what purpose?

This second one is a killer ... yes I have been STOPPED out only to see the price rise again and accelerate away .... However I've also been STOPPED out and the price has dropped like a stone ... Now the VERY IMPORTAIN point is here is that ANY ONE of the stones had the potential to WIPE ME OUT COMPLETELY ... I'd no longer have any capital. NEVER get frustrated by the one that got away ... plenty more fish in the sea ... ALWAYS get scared of yourself if lamenting the STOP not triggered IMMEDIATELY


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## Dutchy3 (19 June 2007)

Chorlton said:


> Hi Dutchy,
> 
> Out of interest, do you also consider the price range of the stocks which you choose to trade?  ie. Is there a Minimum or Maximum price you would consider, or do you just look at the chart dynamics for making a decision?
> 
> ...




Hi Chorlton

What is significant about the price a stock trades at ... keep this one up and I'll learn ya how to answer your own question ...


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## drmb (20 June 2007)

dlineinvestor said:


> PDN is in a descending triangle and looks like it will be there until late June. Unless a breakout occurs, current sentiment may not lend it self to that view, but definately some energy being built up in there.




Nice call by dline - PDN seems to have given the signal today 20 June, above 9.10 on vol, PDN 9.120 9.130 9.120 +0.310 8.950 9.150 8.950 1,995,817 time 1104am 

Very interested in this technique and would like to have someone else confirm my initial impression.


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## nizar (20 June 2007)

Hi Dutchy.

CTS looks the goods to me.
Does it qualify?
If not -- id be keen to know why.

Thanks.


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## Dutchy3 (21 June 2007)

Hi nizar

Ok I've looked at the chart ... why am I interested? Is this a five star set up? or  a chart that has a few interesting features ...

Always ensure all the bases are loaded ... no sense in going of half cocked


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## Dutchy3 (21 June 2007)

Hi jamm - if your still about have a close look at KIM .... another reasonable day this week with a white on a decent volume increase ....

If I was a betting man I'd offer even money that 70 might be as low as this one might go this cycle


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## CanOz (11 July 2007)

Not really sure if this qualifies or not Dutchy, in any case it came up on a scan tonite and its one to watch as i feel it may be seeing some accumulation?

btw, thats a monthy chart.

Cheers,


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## Dutchy3 (11 July 2007)

Hi CanOz

I'd be reasonably happy to call this accumulation too ... Some BIG BLACK weeks over the last couple of years with bigger volumes really casting a shadow ... more a case of the big holders now just about exhausted with the unloading of this stock ... not yet replaced by equally big BUYERS moving it into stronger hands ... Not a perfect set up for me as I'd need to see some BIG WHITE weeks on heavy volume picking this back up


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## tayser (12 July 2007)

hey Dutchy, are you happy with RMI?

I came across that stock a few weeks ago by playing around with Incredible charts, and noted a few days later your comments in the stock's thread - naturally I paid closer attention to it - bought in (paper trade) 4 days ago... and look what happened.


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## Dutchy3 (12 July 2007)

Hi tayser ... did I? can't findit now ... I don't hold this one .... all the same reasonable looking chart


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## nomore4s (16 July 2007)

Dutchy how's this one look?


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## buggalug (20 July 2007)

Dutchy, could MFF be worth watching?


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## Dutchy3 (21 July 2007)

Hi NM4 and bugs

Back from a weeks break ... DVN indeed added to my watchlist ... MFF? not sure not enough trading history for me


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## nomore4s (17 September 2007)

This thread has been quiet for a while.

RDF looks to be forming nicely, it's a weekly chart so may take some time to play out, will be watching with interest.


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## Dutchy3 (17 September 2007)

Hi N4

I've been licking my wounds and examining where I went wrong as I lost about 30% of my capital in the recent past ...

Back on the horse now and a few good ones shaping up so be back posting soon ...


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## It's Snake Pliskin (6 October 2007)

Hi Dutchy3,

FGL is moving along nicely at this stage showing some strength.


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## Dutchy3 (6 October 2007)

Hi Snake 

Yes ... all moving to plan ... nicely geared via CFD so lets see what it can do


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## baboon (3 December 2007)

Just pulling this one back out.  Would you consider the weekly and monthly charts of MKY be in a decending triangle breakout??

Another potential would be WMT?

Appologies as i dont know how to post charts...


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## RichKid (3 December 2007)

Dutchy3 said:


> Hi N4
> 
> I've been licking my wounds and examining where I went wrong as I lost about 30% of my capital in the recent past ...
> 
> Back on the horse now and a few good ones shaping up so be back posting soon ...




Nice to have you back Dutchy, the main point is that you're still in the game AND able to admit that YOU (rather than the market) took a wrong turn somewhere. The longer you survive the more experience you will have. Add sound judgment to that and you will be well ahead. So congratulations on surviving!

From an educational and trade management perspective I'd be interested in any critiques you may have of your experience- was a 30% loss of trading capital a foreseen drawdown for your method? or did you make some mistakes (eg not following a stop loss/profit stop or trading charts which didn't satisfy your entry criteria)? Might be worthy of another thread if it's not related to your methodology as outlined previously in this thread by you. 

fwiw my biggest mistakes stem from poor position sizing (positions too large in relation the instrument's risk/volatility profile) and not following stop losses- in that order. Thought I'd share a few thoughts in support as a fellow trader, I'm no trading expert by any measure (but hope to be!).


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## RichKid (3 December 2007)

baboon said:


> Just pulling this one back out.  Would you consider the weekly and monthly charts of MKY be in a decending triangle breakout??
> 
> Another potential would be WMT?
> 
> Appologies as i dont know how to post charts...




Hi baboon, Welcome to ASF!

Nice to see you getting involved in this thread.

We do have a dedicated section here on ASF to help with admin and generic issues like posting and editing charts- see the ASF Announcements Forum which has a thread on how to post a chart.

Good luck!

RichKid
Moderator


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## nomore4s (3 December 2007)

baboon said:


> Just pulling this one back out.  Would you consider the weekly and monthly charts of MKY be in a decending triangle breakout??
> 
> Another potential would be WMT?
> 
> Appologies as i dont know how to post charts...




MKY probably quite doesn't qualify yet due to no real support base although one looks to be forming at 3.5c, has a bit more work to do yet imo, but 1 to watch I think.

WMT is probably abit closer and has a more "solid base", another one to watch.


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## Dutchy3 (4 December 2007)

Hi RichKid

Actually the drawdown and sideline caused me to re-examine all aspects of my trading plan. I should now disown this thread as I no longer use this method ...

Decending Triangle breakouts, although occassionally quite spectacular, are not high enough on my probability curve to make trading profits. On a weekly chart I do find them at the base of trends that end up been signal points for new weekly trends ... but the time wait can be crippling ...

I'll post a new thread soon once I have enough actually trades under my belt to give some examples, both historical and real time.


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## CFD (5 December 2007)

According to the text books (none in particular) are descending triangles not meant to be monitored for a break down through support? I think any triangle is worth watching because you are watching a pattern/trend that can not continue, you can see when something has to give be it support or resistance.


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## Peakey (13 January 2008)

RIV appears to be forming a descending triangle pattern between $9 and $11.25. (Difference of $2.25)

Support is around $9.00. Breakout would be around the $9.75-$10 range with an upside target of around $12, ($9.75 + $2.25).

Also to note is the head and shoulder pattern, IF we breakdown through $9 then we could be looking for a target of $6.75, ($9 - $2.25). 

Trading for Friday was positive, in the sense that $9 was tested early in the day and then buyers came in and bought the stock up to close at $9.40. 

I hold, so fingers crossed the breakout will be upwards. 

Cheers
Peakey


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## katalyst (13 January 2008)

hey, i havent done much technical analysis. however this chart (IAU) seems to be in a descending triangle and could be due for a breakout. Its been in a down trend for sometime now. I would love people opinion on this. Thanks


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## johnnyg (13 January 2008)

Heres one I posted up the other day regarding PRE. Original Post - "1st is a daily chart with a break up on good volume with a possible short-term target of 0.06cps."






Next is the following 2 days movement.


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## treefrog (13 January 2008)

Peakey said:


> RIV appears to be forming a descending triangle pattern between $9 and $11.25. (Difference of $2.25)
> 
> Support is around $9.00. Breakout would be around the $9.75-$10 range with an upside target of around $12, ($9.75 + $2.25).
> 
> ...




watch this one like a hawk peaky - classic head and shoulders formation there which will have the chartists shorting it like there's no tomorrow if it drops below $9


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## johnnyg (13 January 2008)

Heres an interesting chart for a possible Descending Triangle Breakout. Seems to be abit of a repeated pattern, however the close on friday for me was below the longterm uptrend so abit of caution may be needed.

[EDIT] - the chart is of AAR.


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## Buffettology (15 February 2008)

I was reading the start of the thread thinking to myself "arent descending triangles usually the sign of a breakdown"..........

Then I read the last page and see the trading strategy has been revised........

Interesting to see so many adopting the method (at least taking it into good consideration).  How long were you SUCCESSFULLY using descending triangle breakouts for Dutchy (as in successful trial and error timeframe before you started this thread)?

Good to see you taking some initiative though and thinking outside the box.


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## RichKid (17 February 2008)

Dutchy3 said:


> Hi RichKid
> 
> Actually the drawdown and sideline caused me to re-examine all aspects of my trading plan. I should now disown this thread as I no longer use this method ...
> 
> ...




As this thread has now strayed beyond its original parameters it will now be closed. Refer to Dutchy3's final post above and the first two pages for an outline of the method.

Some posters have merely posted descending triangles rather than those which fit all of Dutchy3's criteria. If you would like to track descending triangles on an ad hoc basis then please feel free to start a new thread....or if you find a descending triangle in a particular stock you may choose to post in the respective thread for that stock.

Thank you for sharing your trading experiences here Dutchy3, we look forward discussing your 'new, improved' method! Good Luck!!


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