New York, NY, July 18, 2012 – In a recent Penny Stock Detectives article, editor Danny Esposito points out that when things tend to repeat themselves continually, as in nature, there is an understanding of a pattern. Esposito notes that technical analysis discovered patterns in the technical charts.
“While patterns are not perfect and can deviate substantially from what they are expected to do,” comments Esposito, “the fact that patterns repeat themselves often enough presents an opportunity for investors to profit from technical analysis.”
A wedge is an example of just such a pattern that technical analysis has uncovered, he says.
Esposito explains that the wedges used in technical analysis are the rising wedge and the falling wedge. The rising wedge is a bearish reversal pattern in technical analysis; the stock price or market is climbing higher, but as it climbs higher, it does so within a narrow range. One of the key indicators in technical analysis for the rising wedge pattern to be evident on a technical chart is that volume on the upside tends to be low, while selling on the downside tends to be high, notes the Penny Stock Detectives editor.
Esposito uses the example of a technical chart of
Esposito notes the big spike in volume on the technical chart when the stock price broke down below the wedge pattern: “In technical analysis terms, this break of the rising wedge on strong volume confirmed the reversal of the rising wedge pattern.”
After this point, the price of ’s stock fell, which is exactly as the rising wedge pattern predicted it would, he claims.
Esposito then provides a technical chart of Rowan Companies from 1999, which is a perfect example of the falling wedge pattern, a bullish reversal pattern in technical analysis. Esposito observes how the stock price traded in a narrow range on light volume during a period of time. He notes that when the stock price looked like it was going to break down from the wedge pattern, strong volume kept the stock price up within the wedge, which in technical analysis terms is a fantastic sign.
Not too much later, the stock price broke out of the falling wedge on heavy volume, which in technical analysis is the confirmation needed for the falling wedge pattern to complete its cycle and so reverse itself: move higher, explains Esposito
“Technical analysis has never claimed to have all of the answers,” Esposito concedes. “However, it should be used with fundamental analysis, because patterns in the stock market are like the patterns in nature: more often than not, they repeat themselves.”
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The editors of Penny Stock Detectives believe low-priced stocks, when researched properly, present investors with great opportunities to accumulate wealth and to increase the value of their investment portfolios