American Express ascending wedge fakeout
AXP has been in an ascending wedge pattern since February. Although ascending wedges see the price climb until their apex, they are a bearish pattern. The price target measured from the point of the breakdown is equal to the left side of the wedge, which I have cloned and placed.
To be fair, the wedge has not yet broken down. In fact, quite the opposite. Today the price climbed above the wedge pattern, but it did so on light volume. Typically, long pattern break outs do not occur on low volume and tend to snap back into the pattern. I took this opportunity to enter a short position at $105 in both stock and $101 strike long put options, betting on the price at least re-entering the pattern and more than likely testing the lower boundary of the ascending wedge pattern as well.
Overall, the wedge seems to have run its course so furthermore it is fairly likely we will see a complete breakdown of the ascending wedge pattern in the coming weeks, in which case I will be adding to my short position on confirmation (i.e. move out of the lower support line on heavy volume) of the breakdown. Wedges are among my favorite and most successful patterns to play as you will see going though my post history.
-------------------------------------------------------------
As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for entertainment purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.
To be fair, the wedge has not yet broken down. In fact, quite the opposite. Today the price climbed above the wedge pattern, but it did so on light volume. Typically, long pattern break outs do not occur on low volume and tend to snap back into the pattern. I took this opportunity to enter a short position at $105 in both stock and $101 strike long put options, betting on the price at least re-entering the pattern and more than likely testing the lower boundary of the ascending wedge pattern as well.
Overall, the wedge seems to have run its course so furthermore it is fairly likely we will see a complete breakdown of the ascending wedge pattern in the coming weeks, in which case I will be adding to my short position on confirmation (i.e. move out of the lower support line on heavy volume) of the breakdown. Wedges are among my favorite and most successful patterns to play as you will see going though my post history.
-------------------------------------------------------------
As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for entertainment purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.
Comment:
Stop triggered trade closed for loss. I've seen so many break outs on low volume get sucked back down, but this does not appear to be happening here. Still no regrets on taking the low-risk, high reward setup here. Remember, its a game of more wins than losses over time.