Analysis 14th August: Channel Chart Pattern at Dixons

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We spotted a Descending Wedge chart pattern at the Vivendi stock. A descending wedge is, surprisingly, a bullish pattern that signals that the bearish trend may be coming to an end. This is confirmed only when price breaks upwards, and in this market sentiment it is not too likely to happen as all stocks are dropping.

We won’t enter a long trade here as I don’t like to enter trades against such significant bearish market sentiment. This article shows how to Trade Wedges in more detail: we will look for a strong support\resistance level for price to bump into and begin to reverse, and after a reversal candlestick pattern we will enter in the direction of the bounce.

This gets us a very profitable and low risk-high reward location to enter and profit from the whole trend, with little risk.

There are several interesting stock chart patterns at the Dixons stock, at the 4-hour chart. First of all we can see that price is closed in a range with resistance at 20.00 and support at 11.5, both of them are psychological levels which confirm their strength as support and resistance levels.

Moreover, price is also in a channel chart pattern which trends down between two parallel trend lines.

Trades that we will enter here:
1. If price breaks downwards and pulls back to the 11.5 level we will join the trend and enter a short trade right after a candlestick pattern.
2. If price breaks the channel upwards and pulls back to the upper trend line we will enter a long trade.
3. If price touches the 20.00 level and begins to reverse (on the daily chart) we will enter a short trade with target at 11.50

Profit target for each of the range-breakout trades is $8.5 = the size of the range (distance between support and resistance). This range is big enough so our trades will have very big reward and low risk in comparison.

That’s an example for easy range trading – we just trade when price hits the boundaries of the range and make easy profits with low risk and high reward.

In the next weeks I will write an article on how to identify and trade ranges, so if that interests you, stay tuned.


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