The SPX is at resistance and will begin to stall at this level.

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The COMPQ  will come back down to retest recent resistance which is now support.

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• The Ascending Triangle is a bullish continuation pattern and is comprised of an upper trend line that is horizontal which acts as resistance and a lower trend line connecting higher lows and converging towards the upper trend line.
• The pattern is found in a bullish market and is generally considered a continuation pattern although it can sometimes reverse the market.
• The breakout point is above the horizontal upper trend line and the target move after the breakout is the widest part of the triangle added to the breakout point.
• The stock begins to stagnate to the upside with wider range trading.  The upside trend line remains as strong resistance as the stock begins to put in higher lows.  The investment community is telling us that there is a diminishing desire to take the stock lower and the presence of a converging lower trend line bodes for an upside breakout above the upper trend line.
• The buying pressure is evident as the stock puts in higher lows while stubbornly holding steady at the high of the range.
• Eventually, the stock will break through and past the resistance to establish new highs on increased volume.

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INDU Chart 2-12-2010

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SPX Chart 2-12-2010

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COMPQ Chart 2-12-2010

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• The buyers at the top of the first peak were victims of buying from the “smart money” as they sold to the “not so smart money” at the top of the trading range.
• These unfortunate buyers will usually hold, refusing to take a loss and waiting for the opportunity to unload the stock at a break even.
• When that opportunity presents itself, at the second top, selling pressure increases and drives the stock lower.
• Other knowledgeable traders who know that the “Double Top” will present an opportunity to short, will do so thereby increasing the velocity downward move.

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INDU Video

SPX Video

COMPQ Video

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• The inverse of a Cup & Handle Chart Pattern.
• The stock bounces off of a support level and moves higher on unremarkable volume.
• A “Rounded Top” forms and then subsequently moves lower on increasing volume producing “The Cup”.
• The pattern is completed when a Bear Flag forms producing the handle.
• The breakdown occurs when the stock breaks the low of the handle on increasing volume.

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