I am posting this chart just to illustrate, why conformation from Price is important and why we say that patterns are not infallible. The chart below is of TATAMOTORS (courtesy my friend Jigs!) and the pattern; Cup and Handle (CNH). This particular pattern is considered to be super strong bullish and always worth a trade; but to TRADE it, you must be patient and wait for a confirmed break of the horizontal resistance above. This delays the entry and probably eats into some of the gains but it ensures that you are on the right side of the trade! TATAMOTORS has yet again made a CNH pattern, a break above 450 and sustaining that would construe a valid breakout and get the pattern into play! If you are a chartist, then these are the charts you must keep and annotate, so you can use them in the future for reference. Once again this takes us back to the golden rule of trading use strict STOPS because the most bullish of patterns can also fail!
1 comment:
Hi..Manoj..the previous "cup" of Tata Motors was perched at the very top, hence it broke down. Now, the "Cup" is at a reasonable level. But we must respect the market(as you said) to show a break above the neckline to initiate a long..Very good input from Jigs and nice interpretation from your end.
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