Falling Wedge Can Lead To Rising Trading Profits
(Educational Segment 027)
One of our aims for regular readers of EQUEDIA is to constantly bring forward and introduce new charting methods. In addition to being a source of thought-provoking actionable trading insights, we want to help our readers better understand how technical analysis can be used from a trading perspective.
Here is a daily chart for Calibre Mining Corp. (TSX:CXB) (OTCQX:CXBMF) that shows a falling wedge pattern that is nearing completion:
We are awaiting a trade signal that will come with several consecutive daily closes above $1.60. Our “confirmation signal” will be when MACD, using trend settings that are much longer than default settings, crosses over the zero line.
A recent press release headline provides a tidy summary of CXB:
“Calibre Increases Nicaraguan Mineral Reserves to in Excess of 1 Million Ounces of Gold; a 254% Increase, Net of Production Depletion, Since Acquisition in Q4 2019”
Now we shift our attention from the DAILY chart to the WEEKLY chart for CXB:
The CXB weekly chart is an “easy read” – provided one has the time and trade discipline to wait on the future signals.
We see that both COPP (Coppock Curve) and MACD have provided excellent trade entry points in the past and will do so again in the future.
Currently, MACD shows the signal line below the trigger line, and both lines are below the zero line. We want to see the signal line turn back up above the trigger line and then for both lines to continue back up over the zero line.
For COPP, we want to see it return above the zero line.
We note with great interest that massive sell volume (the largest red volume bar) was not associated with a corresponding decline in price. Just for comparison, let’s remember our recent weekly chart for FB. Here is a reminder:
Note how the sell volume obliterated price by taking it completely through the Ichimoku Cloud.
We did not see the same kind of price destruction for CXB – a very positive sign.
Be willing to “pay more” when we “see more.” Our trade idea would be to let the two charts, DAILY and WEEKLY, provide trade guidance. Here are some trade signals that we define as reliable trade entry points:
(1) Successive closes above the Falling Wedge Pattern on the DAILY chart.
(2) Return of COPP and/or MACD above the zero line on the WEEKLY chart.
(3) Successive closes above the Ichimoku Cloud on the WEEKLY chart.
A bet on the positive chart pattern can also be made, provided the goal is to realize the above points.
Summary & Wrap Up
CXB experienced chart damage on its daily chart when it started to close below the $1.30 level. We say this because when using the low and high in 2020 for Fibonacci start and endpoints, $1.30 represents the final support level. As noted on the daily chart, CXB managed to consolidate below $1.30.
CXB’s share price is starting to close above EMA(34) on the weekly chart. Both COPP and MACD are showing signs of “flattening,”; a necessary first step to getting back over the zero lines.
In summary, the technical trading picture for CXB is improving. We have shown our “trade strategy” – now it is time for us to closely monitor the CXB DAILY and WEEKLY charts to see when our defined trade threshold levels are reached.
It’s looking good!
– John Top the technical trader
Disclosure: We own shares of CXB and options, and the company is an advertiser