Bulkowski's Rockwell Collins Trading Quiz

What chart patterns can you find? Look for the following: descending scallop, 2 ascending triangles, and head-and-shoulders top (has a tall head).

The ascending triangle (far right on the chart) has broken out upward.

Answer 1 (buy?): Buy because the breakout is upward.

Answer 2 (target?): Try this approach. For the ascending triangle, draw a line (D) parallel to the bottom triangle trendline (C) beginning at the start of the top trendline, like that shown in the figure. When the line hits the date of the breakout, the value of the line is the target. It shows a price of almost 38.

Answer 3 (stop?): I think point A in the chart at the top of the page is too close (4% loss). I would opt for point B, a potential loss of 8%. Volatility is $0.93, so a stop no closer than 33.49 would be wise. That also means B is a better choice than point A.

After throwing back, the stock continued upward until peaking and it's now coming down (F). Price reached the target (blue line) at E.

Question: Do you hold onto an existing position or sell?

My answer: Would I sell? Probably not. I would expect the triangle's apex to support price (as well as the top of the triangle (line A)). At the apex where the two triangle trendlines merge, it's often a turning point for price and in this case, it's a support region. So I'd expect a reversal at F. Combined with the price bar being a bullish spike, that would also encourage me to hold longer.

Surprise! Price climbed to almost 50.