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Chart Pattern Review: The 1-2-3 Top and Triangle

Site Administrator | September 23, 2011

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Chart Pattern Review

Risk Disclaimer:  Trading Futures involves substantial risks.  Past Performance is not indicative of future results.  Consult a financial professional before making any trading decisions.

This week we wanted to showcase a "Pattern Review" of a very powerful chart pattern where a 1-2-3 top occurs in addition to several days of consolidation forming a triangle formation.  Grains have been under pressure recently with Corns and the Soybean complex retreating quickly from their recent highs set in early September.  December Corn had a near perfect 1-2-3 top formation that also coincided with a small triangle that triggered a short on September 8th.  Patient traders were quickly rewarded within 6 days with a gain of approximately $2,000 per contract traded.

Each contract of Corn represents 5,000 bushels and one full point movement equals 1 cent per bushel or $50/contract.  A tick, or minimum move is ¼ cent per bushel and is worth $12.50 per contract.  The trade was a sell stop below the September 1st low of 737.50.    Corn broke out of the small triangle formation and also punched through the low on Thursday, September 8th making the technical pattern short Corn around the 736 area.  The initial risk of this pattern is above the #3 point at 766 or approximately or $1500 per contract (766-736 = 30 cents; 30 cents x $50 = $1500).  The initial target is the difference between the #1 and #2 points and/or the spread of the triangle formation.  This calculation projects a price movement down to the 700 area and hit the target area on Sept 15th (low was 700.25) followed by a low of 691.75 the next day.  If trading multiples, target #2 would be around 680-685 as that meets the upward trend line and should serve as resistance.  Target 2 would have been reached on Monday, September 19th and did briefly bounce higher off of the long-term up trend line.  At this point, it is advisable based on the pattern to adjust stops to a minimum of breakeven or trail the market using buy stops to try and capture a bigger part of the move.  This is a fairly easy pattern to chart regardless of your platform so remember to keep an eye out for it during times of market consolidation.

Be sure to join us for our next event and Learn Insights from a Professional Trader FuturesTrader71!

 

Cheers,

The TradingPub
“Trade, Talk, Learn- Cheers to Success”

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.

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Risk Disclaimer:  Trading Futures involves substantial risks.  Past Performance is not indicative of future results.  Consult a financial professional before making any trading decisions.

This week we wanted to showcase a "Pattern Review" of a very powerful chart pattern where a 1-2-3 top occurs in addition to several days of consolidation forming a triangle formation.  Grains have been under pressure recently with Corns and the Soybean complex retreating quickly from their recent highs set in early September.  December Corn had a near perfect 1-2-3 top formation that also coincided with a small triangle that triggered a short on September 8th.  Patient traders were quickly rewarded within 6 days with a gain of approximately $2,000 per contract traded.

Each contract of Corn represents 5,000 bushels and one full point movement equals 1 cent per bushel or $50/contract.  A tick, or minimum move is ¼ cent per bushel and is worth $12.50 per contract.  The trade was a sell stop below the September 1st low of 737.50.    Corn broke out of the small triangle formation and also punched through the low on Thursday, September 8th making the technical pattern short Corn around the 736 area.  The initial risk of this pattern is above the #3 point at 766 or approximately or $1500 per contract (766-736 = 30 cents; 30 cents x $50 = $1500).  The initial target is the difference between the #1 and #2 points and/or the spread of the triangle formation.  This calculation projects a price movement down to the 700 area and hit the target area on Sept 15th (low was 700.25) followed by a low of 691.75 the next day.  If trading multiples, target #2 would be around 680-685 as that meets the upward trend line and should serve as resistance.  Target 2 would have been reached on Monday, September 19th and did briefly bounce higher off of the long-term up trend line.  At this point, it is advisable based on the pattern to adjust stops to a minimum of breakeven or trail the market using buy stops to try and capture a bigger part of the move.  This is a fairly easy pattern to chart regardless of your platform so remember to keep an eye out for it during times of market consolidation.

Be sure to join us for our next event and Learn Insights from a Professional Trader FuturesTrader71!

 

Cheers,

The TradingPub
“Trade, Talk, Learn- Cheers to Success”

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.

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