Bulkowski's Oxford Industries (OXM) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): inverted and descending scallop, inverted and ascending scallop, 2 rising wedges, ascending triangle, broadening top, head-and-shoulders top, head-and-shoulders bottom.

Price has broken out downward when it closed below the rising wedge, just as the chart pattern predicts.

Answer 1 (trade?): Since the breakout is downward, you can sell an existing holding or go short.

Answer 2 (target): If shorting, price tumbles to the start of the wedge just 32% of the time, which is the price target for rising wedges. A 32% success rate doesn't inspire much confidence. Price might bottom at 11.50, near the site of the flat price movement (red line) just before the wedge starts in late February 2003, but there are other support zones on the way to that price.

Answer 3 (stop): Place a stop just above the wedge high and above the large rounding turn from Nov 2002 to January 2003, say 13.30, which is 3 cents above the 12/12/2002 high. That would put the potential loss at 4%. Volatility is 22 cents, so a stop no closer than 13.16 (the intraday high at 12.94 + 22 cents) would work well.

As the above chart shows, price took off so a short position would have ended in a loss.

The ascending triangle shows a downward breakout.

Question: Do you short the stock again? If you decide to short, pick a price target and stop loss level.

As you can see, the stock made a premature downward breakout from the ascending triangle. Price shot out the top of the chart pattern and made a new high more than double the top of the triangle. If you didn't place a stop, you'd be holding a massive loss.