[PATTERN SPOTTING]
The 'inside W M'.
Just been looking over some recent charts tonight and have started to notice a recurring pattern. It's an M inside a W - I'll call the pattern WilliaM.
I know about Ws but have never read anything out there about them, and all of this is probably just called a W formation but they're pretty interesting to look at. The picture below shows ADM, BP and to a lesser extent BAY in William formations.
The lead up to the first drop was a head and shoulders for BP, and a trend break on ADM. BAYs is just a tiny short term WM so I won't dip into that one.
What we're looking for is a 2/3 retracement to form a high, a slight pull back off the high in the form of a hammer or spinning top candlestick and then a move back to that high. This move signals a double top formation, a short indication with a target of the original low.
The price target off this double bottom is the price on first formation of the left hand side of the W - about a third of the double top price.
From the charts I have here, it may be good to take some profits and let some run - as twice it has more or less gapped up to break the support and resistance line formed by the W. However in the case of ADM - a fall of a price equal to exactly double the height of the W occured.
I will add this to my arsenal of TA weapons in future crystal balling. Important things to consider with a William formation are:
Take profits on full W formation - and maybe let some run to see if there is a gap up.
Just been looking over some recent charts tonight and have started to notice a recurring pattern. It's an M inside a W - I'll call the pattern WilliaM.
I know about Ws but have never read anything out there about them, and all of this is probably just called a W formation but they're pretty interesting to look at. The picture below shows ADM, BP and to a lesser extent BAY in William formations.
The lead up to the first drop was a head and shoulders for BP, and a trend break on ADM. BAYs is just a tiny short term WM so I won't dip into that one.What we're looking for is a 2/3 retracement to form a high, a slight pull back off the high in the form of a hammer or spinning top candlestick and then a move back to that high. This move signals a double top formation, a short indication with a target of the original low.
The price target off this double bottom is the price on first formation of the left hand side of the W - about a third of the double top price.
From the charts I have here, it may be good to take some profits and let some run - as twice it has more or less gapped up to break the support and resistance line formed by the W. However in the case of ADM - a fall of a price equal to exactly double the height of the W occured.
I will add this to my arsenal of TA weapons in future crystal balling. Important things to consider with a William formation are:
- What is the lead up to the pattern - was there another formation, such as H&S?
- What are the horizontal support and resistance lines?
- Is the stock in an up, down or sideways channel?
Take profits on full W formation - and maybe let some run to see if there is a gap up.
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