Bring the B.S.

9/09/2022

No matter what anyone says, patterns and candlesticks are largely self-fulfilling prophecies…

…in other words, B.S.

BUT- this doesn’t mean you should look away…

Instead, just figure out how to trade them.

(Source: getyarn.io)
For instance, a Wedge pattern is a sign of tight consolidation and, when factoring in the battle between bulls and bears, it can lead to incredible profits. I trade these more often than anything else.

What’s important is that you know your levels because algorithms are programmed to detect these patterns and create false breakouts in order to clean everyone out.

It’s when the robots underestimate the demand that the shoe is on the other foot.

From yesterday’s afternoon scan, here’s Harmonic, Inc. (HLIT):

Like yesterday, we’re on the 375-minute chart, only this time we have a Wedge.

Or, at least, we had a Wedge…

Is this a failed pattern?

Support is well below at the ~$9.50 level, but I wouldn’t be too concerned with that…

Resistance is what I’m watching and that’s the red channel topping out around ~$11.55 after some failed attempts at ~$11.47 (red arrows).

We knew ahead of time that the stock would likely fall by the imbalance indicator at the bottom of the lower chart… Profit taking.

Still, looking at the setup, the stock broke down below the Wedge, although I wouldn’t say it did so decisively…

I’ve drawn in a black arrow to show the momentum attempting to shift higher on Chris Hood’s Squeeze Tool. The indicator below is the Squeeze 4-Pack and is a composite version of this. It shows more depth with the Stochastic line now green and pointing higher.

However, the share price has been flat after moving up — a sign of consolidation prior to a breakout…

Volume is steady with some bullish bars and Short Volume has only fallen.

Good for the bulls…

In fact, the share price held above the recent low (neon green line) and is pushing higher.

That said, the move isn’t from here to a break above the Wedge…

The trade is above Resistance. Break this with power and it’s worth a look.

Take the easy trade…

Keep moving,

(Disclosure: I hold no position in HLIT.)

This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.

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