Failed Pattern Becomes Teaching Moment For The Dow
Every chart we view, we take the time to look at in multiple time frames. Since we are not day trading, we choose to look at the Daily, Weekly and Monthly chart patterns. Sometimes we start with the Daily, then move on in time to the Monthly and sometimes it's the other way around. We noticed on Friday the 13th, that the Dow Jones Industrials appeared to be breaking down out of a small Head & Shoulder Bearish Topping Pattern. It was breaking the neckline, which is bearish, while at the same time, it landed at support dating back to late spring of last year.
The measured move out of the Head & Shoulder pattern suggested an ~500-point drop, especially if it broke the grey line in the chart below. It finally broke down but quickly reversed with a bullish "Hammer" candle pattern to get back above the support AND neckline! A great teaching moment that shows failed patterns can be the STRONGEST patterns.
When you look at the Weekly chart below, you can see that the longer term chart had not rolled over to the downside, it simply stopped at the support line! This is why it's important to look at multiple time horizons when trading or investing in different products.
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