IRIS - Bullish Breakout Possible + Versatile Update
Iris has been consolidating in a tight Flag since 3 July & broke out of the Flag on higher volume 0n 13 July. It closed at 1.37 just below its historical high of 1.38. Interestingly it has also formed a Cup & Handle pattern (A-D). Although the handle of a cup normally slopes downwards a flat handle is also possible. Looks more like a pan than a cup now.... 8)
Regardless, it is a very bullish pattern. A breach of 1.38 (the top of the cup and also the historical high) on high volume will be very bullish. RSI is still only 78 (bullish & not oversold) & MACD is positive. Weekly MACD has also recently turned positive.
I rate this a Strong BUY if there is a convincing volume & price breakout above 1.38
Concurrently, Versatile will also move up if there is a strong breakout in Iris. Versatile has been consolidating recently & has stayed above the Flag. So keep an eye out for Iris & Versatile.
posted by Dr. Siva @ 9:54 pm
2 Comments:
Hi Doc,
I just discovered your blog. Very, very interesting indeed. I'm no expert and am really not familiar with TA, but I have the following comments to humbly offer, which I hope you won't mind:
1. I think the Iris Cup-with-Handle (CWH) is quite flawed and disagree that it's a Strong Buy on breakout and in fact, might be quite dangerous doing that. This is simply because of what you have already mentioned ie. there is no downward sloping handle. Logically speaking, there has been no shakeout of weak holders and if it were to break out, many of these weak holders would be looking to sell on the breakout, hence increasing the chance of it failing.
2. Similarly for your MTDINFR CWH post, you mentioned that it was almost perfect. Again, with all due respect, I would humbly suggest that it's a very hastily formed CWH and not a strong signal at all. Looking at it carefully, the downhandle was actually only two days long, with the third day closing UP (instead of down) inconclusively at the previous day's high. Also, from the $1.44 upper edge of the right cup lip to the bottom of the handle of around $1.35 is only a 6.25% drop ...hardly enough to have the necessary shakeout effect. I think a 15%-20% wedge down would be more effective and give a stronger signal.
Anyway, the point of my saying all this is that these patterns look like they were hastily formed and I would go so far as to say they were probably "manufactured" by "operators" to lure chart pattern readers and TA practitioners. These people know what technical analysts are looking for and will give it to them. The best clue or warning of this for us to rely on would be that the "manufactured" patterns are often hastily formed and imperfect, since taking time to create perfect patterns would mean their carrying costs would kill them and make the entire exercise non-viable.
Just my 2sen on a topic I am only slightly familiar with. You don't have to publish my comment if you don't want to. Just wanted to let you know what I thought.
Happy trading and good luck always.
Thanks Ichi, your comments are welcome. Yes you are correct which is why I state that we have to be careful & I mention that traders have to sell if it falls below a certain level.
1) For MTDInf I mentioned that it had to have convincing breakout above 1.44 & traders must sell if it falls below 1.40 which happened.
2) For IRIS I stated that it had to rise convincingly above 1.38 for pattern to be valid. It did not rise above this.
TA is still an Art not a Science. Unfortunately our markets can also be easily manipulated & this does happen like you say.
I believe if we all share our comments & thoughts regularly we can all do much better. Keep your comments coming they are very welcome.
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