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Friday, December 7, 2007

Pennant Pattern/Triangle Breakout

I managed to find one setup today so I hopped in with a small position of 200 shares at $44.34 in LDK. I had my stop set at $43.89 which was underneath the trend line. I thought I picked the breakout point as prices spiked, but being the amateur I am, I didn't wait for volume and candlestick confirmation. Also, buying at the breakout does not give a good risk/reward ratio. I risked $0.50/share to gain $1.50 potentially whereas buying at the support would've been a risk of say $0.25 (basically 1:3 vs 1:6). Anyway, I moved my stop up to $45.13 after the 2 bearish haramis and I was lucky not to get stopped out. I sold at $45.75 for a gain of $1.41 less commission. The Stockcharts service basically pays for itself :D

A small tutorial on how this pattern should be traded and my mistake:

Pennant/symmetrical triangle forming.



Still bouncing in the range.



A breakout at $44.34 or is it a fakeout?



A second pennant formation.



In depth analysis.



Pay attention to volume to confirm signal.

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