Dow Jones Update

'Interesting' triangle developing in Dow Jones. When triangle formation emerge, its time to pay attention!!

Triangle is a result of converging trendlines of support and resistance. Usually, trading action gets tighter and tighter until the market breaks out with great force. Buyers and sellers find themselves in a period where they are not sure where the market is headed. Their uncertainty is marked by their actions of buying and selling sooner, making the range of the price movements increasingly tight.

Finally, when a consensus in the market is reached, this is reflected as the price breaks out of the triangle. A spike in volume on this breakout would reflects stronger consensus that the stock should move in that direction.

However, do note that this triangle formation was not accompanied by diminishing volume and hence might not result in classic triangle breakout kind of of price action. Potential false breakout remains a possibility. Traders should keep themselves abreast of updated macroeconomic condition in order to reinforce the reliability of any breakout in the near future.

Success Logic

" I don't think I have any original ideas...I've gotten a lot of ideas myself from reading. You can learn a lot from other people. In fact, I think if you learn basically from other people, you don't have to get too many new ideas on your own. You can just apply the best of what you see."

-Warren Buffett

UOL

Chart 1:

Chart 2:

Anticipation of goodies to be handled out in Singapore's budget and US incoming president-elect Mr Barack Obama crowning have certainly given STI a good run in recent time. UOL did its fair share of price escalation but as expected, it rose just enough to meet its strong resistance at its long term downtrend line before toppling over. (Refer to Chart 1)

Taking a closer look at its shorter term action (refer to Chart 2), UOL annouced its intention to takeover UIC today and the market reacted negatively (Its not difficult to understand why). The volume registered today can be considered as high especially if one takes into account the trading halt for bulk of the session today.

Personal Opinion:

Technically, price action broke down from its rising trendline support. Price is likely to face further downward pressure. If 2.05 fails (which is the MA50 support). We could see price heading down towards the next whole number support at $2. Once that fail, price could continue to fall further with next support likely to be $1.90-$1.92. Bearish

ST Eng

This is a mini eg. of Triple Top formation in the making. Triple Top is a pattern very similar to the Double Top -- only that there are three distinctive tops rather than two. The technical target for Triple Tops is derived by subtracting the price difference between the top at #1 and the reaction low from the breakdown level. After the third top has been created, the breakdown level is the low created between tops #2 and #3.

Personal Opinion:
Rather than wait for completion of technical Triple Top formation which is form if $2.23 fails, Aggressive traders can consider shorting near resistance level at around $2.58. However, a closing above $2.60 with heavy vol should be interpreted as breakout from resistance and traders should immediately cut loss and cover back position.