Lee Farber Charting Exercises.docx

Lee Farber Charting Exercises 1. Support/Resistance a. Find a stock that has traded in a range for at least 20 minutes b. It must have touched the top/bottom of the range at least 4 times on a 3-minute bar chart c. Minimum Range is 15 cents. Maximum range is 50 cents WFC trades between 22.45 and 23.80 on June 18th starting at 10 AM before breaking to the downside into the close at 3:42 PM.   2. Trend Lines a. Uptrend, Minimum 30 minutes, Minimum 75 cents On June 18th, GS traded in an uptrend from 2:15PM at 142.62 until it broke through the trend line at around 3:20PM at a price of 143.38 before collapsing to 141.62 in about half an hour. b. Downtrend, Minimum 30 minutes, Minimum 75 cents On June 10th, FCX traded in a downtrend from 1PM at 59.67 until it broke out from the trend at 2:07PM at a price of 58.25 before trading straight up to close at 59.93. 3. Engulfing Pattern a. 3-Minute, high/low of bar must engulf previous bar, bar range must be at least 10 cents On June 17th, at 3:07 PM, there was an engulfing pattern where the bar took out the high of 141.52, then the low of 141.20 before trading down to a low of 139.48 just before the close. b. 5-Minute, high/low of bar must engulf previous bar, bar range must be at least 15 cents On June 17th, RTP showed an engulfing pattern at 2:30PM, where the 5 min chart shows the stock taking out the prior bar’s high of 172.64 then the low of 172.01 before trading solidly lower. c. 10-Minute, high/low of bar must engulf previous bar, bar range must be at least 25 cents On June 9th, JOYG showed an engulfing pattern at 12:30PM, where the 10 min chart shows the stock taking out the prior bar’s low of 38.09 then the high of 38.28 before trading solidly higher. 4. Pennant, Use a 1-minute chart, Find a stock with a flag pole of at least 30 cents, At least 2 bars of consolidation, Second flag pole of at least 20 cents On June 18th, GS traded in a pennant formation starting around 9:33AM. The flag pole was in a range from 139.63 to 141.80, and the second flag pole was in a range from 141.65 to 141.00. After the stock broke through the high of the first pole, GS traded in a moderate uptrend until after 3PM, where it broke down from a high of 143.70 to close at 143.09 5. Triangles, Ascending, Use 5-minute chart, 60 minute minimum On June 16th, MS traded in an ascending triangle beginning at 12:45PM before breaking through the top of the resistance (28.47) at 1:45. It immediately traded up to a high of 28.58 before breaking back through the bottom of the pattern and trading immediately lower to a low of 27.81. Although the stock did immediately follow the pattern by trading up, the triangle proved to be an important technical level because after breaking through the bottom the stock made a 1 point move, which is very large for a slow moving stock like MS. b. Descending, Use 5-minute chart, 60 minute minimum On June 12th, WFC traded in a descending triangle from 12:45 PM after making a relative high of 25.40 before trading through the support at 1:30 PM (price of 25.22) before spiking down on higher volume to a new intraday low of 25.09. c. Symmetrical, Use 5-minute chart, 60 minute minimum On June 10th, QCOM traded in a symmetrical triangle from 10AM until it broke the bottom of the pattern at 10:45AM (price of 45.95). After this, QCOM traded steadily lower until making a new daily low of 45.64. 7. Double Top, Use 5-minute chart, Must be at least 10 bars between two tops, Difference between the tops and valley must be at least 50 cents On June 18th, AAPL traded higher on the open to an intraday high of 138.00 at 9:50AM, which was also an important longer term level. It failed to lift 138, and then traded back near that level at 1:08PM from the valley of 136.72, but failed at 137.91, forming a double top. After dropping that level, AAPL traded sharply lower to close at 135.88. 8. Double Bottom, Use 5-minute chart, Must be at least 10 bars between two tops, Difference between the bottoms and peak must be at least 50 cents On June 10th, RIMM made a double bottom formation, making the first low of 82.17 at 11:10AM. After making this intraday low, RIMM traded back up to find resistance around 83.24 at 12:15PM before trading back near the original low (to 82.22) at 1:45PM. After failing to drop the original low, RIMM proceeded to trade up to close at 83.42. 9. Head and Shoulders, Use a 10-minute chart, the head must be at least 30% bigger than the shoulders, Difference between the bottoms and peaks of the shoulders must be at least 30 cents In the two days from May 27th to May 28th, UNH made a nice head and shoulder pattern. It made the first shoulder at 10:30AM on the 27th at a price of 27.85 before consolidating nicely into the neck. It made the head at 9:55AM on the 28th at a price of 28.37 before trading lower back into the support of the neck. It tested the 27.85 level, trading up to 27.92 at 9:55AM on the 28th but couldn’t hold there. It traded back to support, couldn’t hold below, consolidated, then broke to the downside at 3:15 into the close. On the 29th, UNH twice tested the prior day’s support at the neck of the pattern, but couldn’t break the 27.37 level, and then the stock traded sharply lower to a low of 26.00.   10. Reverse Head and Shoulders a. Use a 10-minute chart b. The head must be at least 30% bigger than the shoulders. c. Difference between the bottoms and peaks of the shoulders must be at least 3 GS traded in a reverse head and shoulders pattern over May 1st to May 4th. GS established the first shoulder at a price of 128.06 at around noon on the 1st before moving back up to consolidate around the neck. Then GS made the head pattern with a low of 126.16 during the close on the 1st and the open on the 4th. This low was tested twice and held. Then, the neck was breached slightly before making the second shoulder at a higher low of 128.37 before breaking strongly to the upside to reach 140.36 by 2:50PM on the 6th.