The View from 5,000 Feet

As a market technician, sometimes I gotta just turn the TV off and look at the charts.  I know something is going to happen around 10 am tomorrow, so I might be watching the price action around that time if I’m available.  But I won’t be looking for immediate price trends around the news, I’ll be looking for a breakout of the symmetrical triangle that’s been forming for the past 3 weeks.

Here’s a “clean” chart:

And here’s an annotated chart:

The symmetrical triangle is in orange, and I’ve added Volume by Price bars to the left.  I’m still new to these, but I believe the long, green bar I’ve circled represents where a lot of buyers have picked up shares, and will be ready to sell if prices rise then come back to those levels.  The lower bar show where many shares have been sold, and new buyers may be willing to come in if prices reach those levels.

The weird thing is, if you go to Chart School at StockCharts.com and look for “Volume by Price” it gives examples of these bars defining support and resistance; but the resistance bar is mostly red, while the support is mostly green.  It’s the inverse of what I see here.  I suppose that either means that 1170 is going to be the base of the triangle breakout, and it will break to the upside.  OR, it means that the triangle only shows consolidation of a continuing, bearish trend.

Yeah, I said it will either go up, or it will go down.  It’s the stock market, what did you expect?

Regardless of volume by price, I’ll be trading the breakout whichever side it’s on.  I probably won’t even wait for a retest confirmation, but I will make sure the breakout has force!  But I’m through trading within this tightening range.  We closed the day dead-center of the pattern.  So, even if Chairman Ben’s speech causes a pop up, we could still be within range of this pattern, and nothing would be really gained for me.  Options action suggest that traders think his speech will cause a rise, but I don’t like the higher red volume bars compared to the declining green volume bars in the above charts.

Technicals could be telling me that this is just a pause in a new bearish trend.  Be careful, and stay thirsty, my friends!