Pattern failure on Biosensors?

Evening all,

Today I have a chart of Biosensors, B20.SI.

In my last post, I identified a large head and shoulders in the chart of B20.SI. Coming on the heels of a long uptrend, it seemed like a perfect set-up for the end of the uptrend. Soon after my post, Biosensors made a false breakout towards the downside (circled in red below). Fortunately for me, I was patient in entry, so I did not get in when Biosensors staged a sharp reversal.

biosen

Biosensors then shot up by 25% to $1.40, which is where the bottom of the head is. I deduced that a head test should be the next event on the chart since the reversal from the false breakout was so strong. Alas, $1.42 stayed as the high for biosensors this year. What do you do when patterns perform like that?

Trading Biosensors for trend set-ups would have been painful and frustrating. The solution seems to be the commonsensical one of stopping and taking a break during a whipsaw period. For now, I have to take the large head and shoulders off. It is not often that patterns behave like that. And even if false breakouts occur, they end up being a busted pattern. That means that direction to trade is the opposite of what it was before. I remember reading a quote somewhere along the lines of this: good traders get stopped out, great traders reverse their position totally.

Right now, I am seeing another pattern on the chart of Biosensors. A distinct descending triangle has emerged. Strictly speaking, Biosensors broke out towards the downside on Wednesday but price managed to rise back into the triangle. The market knows there is an important level at $1.19. That level proved to be good support until Wednesday’s pierce. In retrospect, traders were testing a break of $1.19, which filed as Biosensors climbed back up to close at $1.90 n Friday. The week ahead will give us better indication if this descending triangle results in a breakout upwards or downwards. Remember, all triangles can break out towards either side – always wait for the chart to give indication.

biosnes

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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