Well, hello everyone. Welcome to Getting Started with Technical Analysis. My name is Barbara Armstrong. I have been away for lo, these many weeks working on the BARB 2. 0 project. I have a new knee, and as much as I love the old knee— and it took me on a lot of great adventures— it was time to welcome a new knee to the fold so that the adventures could continue. But I am glad to be back today. I'm sitting in a chair, no knee skills required. We are going to talk about price patterns, and we're going to talk about wedges in particular and pennant-type patterns today. That will be our focus. We're on week six of a nine-week rotation. I have got Mr. Cameron. May with us in the chat, and he used to teach this class.
So he has a wealth of knowledge on the subject. So if you have any questions, please don't hesitate to ask, and between Cameron and I, we should have answers for you. If you are not following us in the land of Twitter, now known as X, you are missing out, my friends. My handle at barbarmstrongcs, Cameron's at CameronMayCS, would love to have you follow us over there. And just before we get into the topic at hand, I just want to remind you that everything that we cover here today is for informational purposes only. None of it to be construed as a recommendation of any particular stock or trading. strategy. If we talk about options, know that those carry a high level of risk and aren't suitable for all investors.
You have to apply for option trading privileges with Schwab, and not all will qualify. This is called getting started with technical analysis. So our focus in this class is on looking at the charts or technical analysis, but it behooves us to take other things into account: what's going on globally, what's going on politically, you know, within our country and other countries, understanding fundamental analysis, being aware of what's happening during the earnings season— all these good things. Okay, we use the PaperMoney software application, which is a brilliant place to learn and develop some skills, not only on how to use the platform, but making sure that we understand a trading strategy before we consider trading it in a live account. Okay, so here's our series overview. And Mr.
Ben Watson has been filling in for me in my absence, and he went through the first five in this rotation. Last, he talked about flag patterns. So, if you missed that, you're welcome to go back and pick that one up. And today we're going to talk pennants and triangles. And then next week, we're going to talk about channels and reversal patterns, which would include. head and shoulders, inverted head and shoulders, and that kind of thing, cup and handle patterns. But today we're going to look at pennants and triangles. Okay, and we're going to look at, you know, what a triangle or a pattern is. And then we're going to look at a bunch of examples because I think that really, by going out to the platform, that's kind of where, at least for me, the magic happened and things started to make sense when I could see it and draw it on a chart. Okay, so how do these price patterns occur? Well, we have horizontal and diagonal support and resistance, and these can create some common shapes. So one example might be, and let me just bring up my drawing tool here. We'll move that out of the way. Well, I'm going to try and move it;
don't want it in the middle of our chart. Now, why is it stuck? Welcome back! I've been using this today for something else. Okay, let's see if I can get rid of it. Oh, I do not want this! So, Okay. End of slideshow. I'm trying to get rid of my drawing. Okay, let me just come here. Sorry, guys, I have used this probably 10 times today and had no issues with it. And now, well, let's just try and ignore it, okay? And I guess I won't be using
... Well, I would like to just set up here. Let me just try, and
I've been trying to drag it.
It's not letting me do anything there. Can you go to blank the screen for a minute. So I can get rid of it.
I want you to go to wait. We're having technical issues.
Okay, so it's just ignoring that it's here. Okay, I'm just going to leave this here, and I apologize, guys, but somehow I've got this weird thing that it's like it's frozen on my screen. So we're just going to keep on going. So here's our triangle pattern where we have a series of, in some cases, it can be a series of lower highs, then a series of higher lows. And when we get this, we've got this kind of coil pattern setting up. And the trend can be either bullish or bearish, and it can occur in any timeframe. But if we're looking at a daily chart it will often need at least a month to. And sometimes we can see these form in smaller timeframes.
To some extent, it looks at you want to look at what type of timeframe you're trading also and take that into account. And what we're looking for is a break of support or a break of resistance depending on the. So if it's down trending in this case, this one has been up trending and then we see this consolidation. So the expectation is that it might break to the upside, but sometimes this can be the sign of a trend reversal, and it could come down and break to the downside. But what we're looking for is a break. And then the target what. we're gonna do is measure the width of this from the top to the And then if this is, say, 10 let's see if I can do this. No, it's not recognizing it, it's just hanging out there. So if this is like a 10 pattern, then we'd be looking for it to move 10 to the upside. If this is the width of the So let's go out and look at some examples.
Can I just try one more? I'm gonna have to reboot my whole system to get rid of it, I think. Okay, so let's start with let's start with So what did we have? We had a lot of ups and downs with and it's been a very responsive stock, we can say that. But since the end of May it hit a high here, and then it hit a lower high, and then another lower high. So we've got a series of lower highs, yet when we look at it, if we come down to the support level starting in June, we had a low. But then what we're seeing is a series of higher lows. And so this stock, when you look at it, we've seen it go up, we've seen it go down.
It's in which way do we think it might break? Well, we aren't sure. And so what we might do with something like this, if you're saying, well, I wouldn't mind trading this if it breaks out, but it hasn't broken out yet. So you can do a couple of things. You could say, well, I am going to put an alert in, and if it goes above this 350, it will have broken above. We could create an alert here to say. hey if this goes above this 349, 71 or this 350 range consider placing a bullish trade. Now what might a bullish trade be? Well, it could be any number of It could be buying the stock and putting a target in. It could be just buying the stock and saying you're going to hold it.
It could be a short put vertical, or a long call vertical, or a long call. It could be any one of those things. And on the other side, you could say, well, I don't know that Tesla's gonna break to the upside; I think it's more likely to break to the downside. Well, you could put an alert here around 300 and say, hey, if this goes at or below 300, or below that 300 level, or call it 299, we could look at placing a bearish trade. Now, what might a bearish trade be? It could be buying a It could be doing a long put vertical. It could be a short call vertical. So it could be any number of things. But what we're seeing now is a pattern being created; it hasn't broken out either to the upside or the downside yet.
All I can say is, welcome, welcome back. Okay, let's look at So when we look at Uber, and again, you know this hit a high back here, and I've got a one-year chart up in July, just over a month ago, and it hit this high, and then it started pulling back. But, you know, it's been really uptrending since this low here back in April, and it hasn't. been a straight line up but it kind of it's been pulling back and then it hit this low here in August, and now it's moving to the upside. And so, you know, we were looking for a break one way or the other, and to you we started to break out what Friday of last week.
You know, it kind of went above that line, and you might say, well, you could be a breakout and it could be a fake out, but then it moved pretty dramatically on Monday and moved up nicely, and then we're seeing a lot of this pulling back type behavior today. But if we look at this, could we, if we because we have seen this breakout, and you know, if we were to measure the expected move, we could measure. from here to here and put a target in or we could say you know what I'd like to do a swing trade just back up to the previous high. And how could you do that? Well, you could do that by buying the stock you know, and so you could buy a hundred shares of stock and put in a target around this 97, call it 97.
50. You know that's close to the 97. 72. And you might say well that's not that big a move, and you're right. But if you say okay, if I got out at 97. 50 and I pay 95 to get in, that's 2. 50. Well, we know if it was 100 we were paying, that would be a two and a half percent return. And how long do we think we might be in this trade? You know, maybe a week. So Chicken Little is asking where you would measure from if you wanted to have a target based on the triangle. So you could come from here to here and say, okay, that's about 11. So then you'd come here to this where it broke out from around the, say, call it 91. You'd add 11 to that; you'd say, okay, my target here is gonna be 102. So that could be a target here based on the price pattern, a potential target.
And I'm rounding here. So if you wanted this to be 102, you can just come in here. And then we can come over here and say potential price target
based on the pennant pattern or the triangle pattern. But we could also say, I see this breakout. Oh, name is too long.
So we could have a target there or we could come and just say we're going to make this a swing target. And that's legitimate too. And then do you wanna have an exit? So seriously says, well, what about an exit? And I really liked the way you're thinking here, guys. So because we wanna define our risk. And so if we say well it broke out here's our line around this, call it 91. 89. So if we say hey, if it goes 3, if it goes back below that line, so if I take that 91. 89 and I multiply that by let's call it, let's say 2, if it goes 2 below that. So if it gets to 90. 50, so that would actually be below this line.
Also, it's not going in the direction we wanted. So we could put a stop based on that 90. 05, okay. And so we're going to, and so how much are we? Well, we're risking about 500 if we were to buy a hundred shares. So if we come to the trade tab, we are going to right-click on this, and we're gonna buy custom with an OCO bracket. We're going to say, okay, we wanna buy a hundred shares, want to sell when it gets to 97. 50 or if it goes below 90. 05, we wanna exit. We're gonna make these good till canceled. And in this, we have a trade stock trades with a target. So we know this is not a long-term trading strategy for us.
We just wanna get in and try and make a little money. So this is a swing trade target, and this we can make it as long as. We want. This is just a note from us to us. So it's based on a breakout of a pennant or a triangle pattern. So when we go back and look at this again, we'll know why we did it. Yeah, it doesn't always have to be a vertical measurement. Now, sometimes it can be. So there was one, let's see. Well, let's just look at some additional charts here. I think it might've been Amazon. And I was saying I looked at so many stocks today, and I wasn't seeing a lot of these patterns. But here we have, as we all know, in February, kind of all hell broke loose and the market started falling.
And then on April 7th, it was like they hit their bottom and we're seeing a lot of these. deep V type patterns or, like in this case, we had kind of an inverted head and shoulders, and it broke out, came back to retest, but we've got a little bit of a pennant pattern setting up here, which kind of started at the end of July. It's only August, what, 18th, 19th? It's August 19th here, but we're seeing a bit of consolidation happening. And so some might say, like, I'd like to wait and see this breakout above here before I consider placing a trade on this. Let's look at RTX.
And are we seeing something similar here? I mean, this has had quite a run, but all of a sudden, we're seeing it's been pulling back, and some might say, well, this is just it's setting up quite the bull flag, but it's been pulling back for a couple of weeks here. This started two and a half weeks ago. So, you might say, well, here's a bit of a pennant pattern setting up here if we come from here. And we wanna see this break to the upside. So, we could do the same type of thing. We could put in an alert; you could put in a conditional order. Let's look at Carvana. And again, I mean, this has definitely been uptrending.
Notice that common April 7th date when things seem to turn around for the market in general, but here, since kind of mid-June, June 18th, we're seeing a series of higher lows. And then, on earnings, this thing really gapped to the upside but it's been pulling back since. And some might look at this and say, well, why did you draw your line here? And you know what? Good question, because some might say, well, you drew your line like that, I would draw my line like this. And I think it's already broken out and come back to retest. Well, you can draw your lines however you want. But the net of it is, it's sitting on this support line. And the question is, is it going to bounce? Is that support line going to? Okay. Okay, so that's Carvana. Let's look at Uber.
OK, so here we have Uber. And where did I come up with this potential price target of 102? Well, if we take this line, so let me just get rid of this. So we have here again a, then we had this series of, and then it started pulling back. And this wasn't just for a couple of, this has been like a month and a half of pulling back. And then it hit this bottom here at the beginning of, and for the last two weeks it's been kind of climbing the. But some traders may have been looking for it to break above here. And again, very similar to the other one that we looked at, we saw it on Friday peak its head above, kind of moved with gusto, and then a very similar pattern here. Oh well, we already looked at this one, our swing target. Sorry guys, Uber, I'm trying to cross them off as I go. I must have written that down a couple of times. OK, let's look at McDonald's.
Seriously, seriously, it's saying how does one find underlyings with the smallest stop loss possible? You're going to have like a tighter stop loss if you get something just as it's breaking out, if you want to put a stop below a support level. So, if we look at McDonald's, which has had kind of a rocky ride, I mean, look at this. This is a-I call this a Tums chart. It's enough to give anyone indigestion. But if we come and we look at the live news, because we just had earnings on this when? On August 6th, and it beat on And this, you know, is not, you know, the end all be all. But when I come back. to August 6th and look at this truest raised price target to 360.
Like that's off our chart, that's so high, 335, that's way up here. What was this one? 325, 360 Barclays. So it had a very positive response from the analysts, it would appear. You know, from just what I'm seeing, scanning the live news feed. And you know, we had this stock, you know, come up here, had a high around 318, it's currently sitting at 310. And then it pulled all the way back to around that 285 mark. And again, you know, technical analysis, a bit of the art, is, you know, it's in the eye of the beholder. But if we see that we had this, you know, lower highs, higher lows, it kind of peaked its head above last week came back to retest, and then today is moving to the upside. And so could we again do something similar? And again, if we're measuring, would we measure? Well, we'd go from the top to the. So if we come from the top to the, that's about a 36 move. And so if we say okay, well what's 36 from where it broke out?
Around that 343 ish mark, 36 there we go.
So that would be around 345. So if we look at this and say well, that could be a target, this is a potential target.
Nothing seems to be working well for me today. Here we go. And then I'm just going to edit this. And so we could put this as a potential target and make this 345
now a resistance level. is going to be a previous high. So we could say, well, around this, you know, 321 level. And at one point, you know, up here, you know, it made it up to 326. So again, if we wanted to be a little more conservative, we might say, hmm, there's been a lot of. The markets are pulling back a little bit today, but could we put in a target based on this breakout? Again, you know, a swing target might be closer to, you know, 321 like this previous high here, 321. It was 321. 61. So we could make this, you know, 321. 50.
So, you know, how much might we make? Know maybe 10-ish a share, just over that. You know, 10. 70 a share. Now, where might you choose to? Well, you might say, hey, if it comes back. below this line and this is around 307. So if I go 2 below that, 307 times 0. 98, so if it goes below 300, 86, I'm risking nine. Yeah, and if your stop is too tight, your odds of being stopped out go up. Yeah, so Tammy is saying, why is the target so high? And it's just saying based on this price pattern, it's saying this could be a... Okay. And, you know, it may never get that high, and it may blow right through it, you know.
And so this is a more conservative target here to say we're just going to go with this swing target. We aren't going to go with the potential target, but if it goes up and goes through the swing target, could we place another trade? We could. You know and can we do this with stock or an option? We can do it with either one. I'm just giving you a stock example today, but we'd come to the Trade tab. We'd right-click, Buy Custom with an OCO Bracket. We're going to put in our, and our target was what was it again? A 321. 50.
And then our exit would be at 300. 86. And we're going to make both of these good till canceled. And again, with a stop loss, does it guarantee that if the stock gaps down, that we're going to get 300. 86? No, if it gapped down, we might get out a price that's substantially lower if it were to take a huge drop. Now, if it gapped up, on the other hand, we could get out a little higher. And have I seen both of those things happen. I have.
Okay, so we're going to put this one in our stocks with target also and our entry. It's a swing target
with our entry based on a breakout of a pennant or a triangle pattern.
Okay, so we bought a hundred shares of McDonald's. All right, so there's Mickey D's.
What about, let's look at UPS, because the examples we've looked at so far have been pretty bullish and UPS, not so bullish, right? Like, it was kind of hanging in here, going kind of sideways, tried to rally. I mean, this has been down trending. This stock is down 30% year to date. And yet we had, it was trying to We had this pennant pattern set up where we had. A series of higher lows, lower highs, and it broke to the downside. And with some oomph, I might say. And so if you wanted to do a bearish trade, how might you trade that? Well, you might say, well, it tried to rally and it looks like it's pulling back. You could do something like a short call vertical. And what's a short call vertical?
A short call vertical is where you say, you know what, I think this thing is gonna stay below 89. So I'm going to sell a call which is unlimited risk. And because I don't like unlimited risk, and when I sell a call, I'm believing it's gonna stay, because I don't own the— I believe it's gonna stay below 89 or 90, I'm gonna buy. a call above it just in case I'm wrong. And so that's something that you might wanna consider, but today we have a bullish candle on this. So we might wait to see if it comes up and hits its head again. And just so much of trading is about patience, but we definitely have a pennant pattern here, a triangle pattern where it broke to the downside.
Okay, let's look at ADI. Now here's one where you know we had this, you know, highs, lower highs, and then it, oh, what's the date? Guess what? Around that April 7th, right? It started moving to the upside, and it broke above. You know, has it reached a potential target yet? It has not. Now, might it never do that? It might not. But it's another example of a pennant pattern where it did break to the upside. How about Hershey? Hershey, you know, here's one where we're setting up a bit of a pennant pattern. Now, higher lows, lower highs; it's still in the middle of the pack. And I mean, one thing we have this pattern occurring here, and we can all see that. But, you know, when we look at this, you know, here's the stock.
It's up a modest 6% so far this year, as opposed to, you know, the S&P, which is up 8%. You know, so it's kind of in the running; it's not like this has been super uptrending. It's been kind of going a whole lot of nowhere a lot of this year. And then we have this. So instead of purchasing stock, we might wanna, you know, this is where something like a short put vertical, if it breaks to the upside, or a short call vertical, if it breaks to the downside. And if you're not familiar with these, you might wanna check out the Getting Started with Options series. But again, it's another pattern setting up. Okay, let's look at, let's look at, I'm a bit of a Disney girl, not like Mr. Ben Watson, who is like the ultimate Disney aficionado. But, you know, and again, we had a high here back at the end of lower highs and then low higher low. And how will this play out? We don't know yet, still setting up. So stay tuned. How about Starbucks?
You know, here's another pattern in the making. And this has been, you know, going on since March. You know, this thing had a great fall, came all the way down. You know, at the end of April, it seemed to hit a bottom here. And you know, it has been working its way back up. But we're still nowhere close. And you know, it seems now like it keeps And when you're drawing these lines, you just want to kind of try and kiss as many candles as you can. So this one, kind of on earnings, you know, opened really high and pulled back throughout the day. But you know, it came and kissed it here and here. And so what we'd be looking for is it to break out above that 95 if you wanted. to be bullish or break down below this 90 know, but it hasn't broken either way yet. How about on?
Okay, so here's one, you know, and I forget who it was a little earlier that said, " Oh, I thought you had to measure these horizontally So here's one where, you know, we had similar highs, and this can happen frequently too. We had similar highs, and we had higher lows. And then it came out and broke out here and then continued on. And I think I drew this pattern the last time that we talked about this subject. So it broke to the upside, and we said, " Okay, here's the width of our pattern And what I did is I drew that pattern just so I can show you; I drew the pattern. and then I copied it. So you can come here and say, you know, I want to duplicate this drawing.
And now I've duplicated it and I'm bringing it over here from where it broke out. And so here was a potential target around 60. And did it actually end up going up and hitting 60? Yeah, it got to 63, 63. So had we placed a target based on the width of this pattern, would it have hit that target? It would have. Did it go straight up and hit it? It did not. Like it kind of went sideways for a bit. And now this old resistance level has come back and retested as support. And you know, that's not uncommon for us to see that either. Okay,
okay, so what was that? That was on. Oh let's look at TXN. So we're looking at a lot of examples here, aren't we? And again here, you know, April this one was April 11th. You know, a lot of stocks it was April 7th. So April 11th it hit a low, it was coming up, and then it was like woo the run bad news on earnings, I'm assuming, because it dropped dramatically. But we haven't seen it come back above this 30-day moving average yet. And so if we just draw this line here and say when might we consider this uptrend to perhaps be resuming, or you know, because we're seeing a series of higher lows here, when do we see the downtrend continuing? It would be if it broke either above this line around the 200 ish mark or broke below here around that 189. And so, you know, we could put, yeah, we could put an alert in for those as well, or we could just leave it on our list. Okay, so let's look at one last one. We're gonna look at, let's look at Roku.
And again, this is a stock that's had its ups, and but it's been up trending, and then we've seen this series of lower highs and lower lows. So, kind of a classic triangle or pennant pattern setting up. It came up, hit this diagonal resistance line for the second time and is rolling over. And so, where might we expect it to stop pulling back? Maybe around this 85 mark, and then if it but what we're ultimately looking. for is a break out of this pattern one way or the other. So I hope that you guys have found this helpful. We did place two example trades today. So we did one on McDonald's, and then we also placed one on Uber. Now, Uber didn't get filled because the price has gone up a little bit.
So we are going to come in and cancel and replace that order and say, okay, you want 95 13, we'll give it to you. Okay, so we did two trades. We did the one on Uber and we did one on McDonald's. And I'll just make sure, oh, there we go. And so we'll follow up on these in weeks to come, but just this idea of being able to look at. Feel free to draw lines with drawing tools at work and next Week, we'll come back and we will look at trend reversal patterns. So I thank you for joining me. If you haven't followed us in the land of X yet, I invite you to do so. Barb Armstrong, CS; Cameron May, CS.
If you haven't hit the like button and subscribe button, likes are a way for you to do a favor for a random stranger because it moves this up in the YouTube algorithms so that more people can find this. And of course, by hitting subscribe, it gives you a complimentary membership to the Trader Talks channel from Schwab Coaching on YouTube, which is where you can find all the archives of this content and find out what's coming up next. So I encourage. you to do that as well. Thanks to Cam for his help in the chat and the people behind the scenes for their assistance with each and every webcast that we do. And of course, we wouldn't be here without you. So thanks to each and every one of you for continuing to show up for yourselves and for your future selves. Take care, everyone. Have an awesome day. Bye for now.
