Bulkowski's Northwest Pipe (NWPX) 2 Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): descending triangle, symmetrical triangle, triple bottom (hint: middle of chart), ascending scallop.

Points 1, 2, and 3 are the triple bottom. Bottom 2 is composed of two minor lows. You might want to draw a horizontal line along the bottoms and an up-sloping trendline along the tops and call it a broadening top, right-angled and ascending. The descending triangle has broken out downward on very high volume.

Answer 1 (trade?): Short the stock or sell an existing holding.

Answer 2 (target?): Use the measure rule to predict a price target. Take the height of the triangle (highest high to lowest low in the pattern) and subtract the height from the breakout price - the price where it breaks the lower trendline. That places the target at 18.95.

Answer 3 (stop?): You can't use the top of the pattern as a stop because it's 15% away. That's too far. I'd place it at 22.51, which is 9% away. I show the location just above A.

Price made the type of chart pattern that I look for: A downward breakout from the descending triangle that busts when price breaks out upward. They usually lead to a strong rally, as in this case.