Chapter 3 Definitions, Structures, & Examples
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Nirvana Systems Inc.
3-35
Profiting with Chart Patterns
Consolidation: Charles Schwab
In this chart of Charles Schwab (SCHW) we see a nice Broadening Continuation. As
we see price break through the lower range of this consolidation pattern we quickly
locate the prior high and low for our Eights scale. Price
quickly reaches the lower
boundaries without closing our position so we once again use the Eights scale
extension where we get an exit around $24 for a fast 23% gain.
Figure 3-35.
Consolidation Shown on the Chart for Charles Schwab
Chapter
3 Definitions,
Structures,
&
Examples
Profiting with Chart Patterns
3-36
nirvanasystems.com
Profit-Taking Rule
This section discusses the Profit-Taking Rule. Here we have an broadening bottom
pennant triangle formed in Sysco (SYY), which is a average-priced stock and also a
fairly volatile stock, as you can see from this chart. As we push up through the top of
our consolidation, the price chart crossed 6 of our Eighths tool lines in 4 bars. Then
we Sysco started moving back down with in a few bars..
Whenever we cross three
Eighths lines in rapidly in just a few sessions, we usually should just go ahead and
take profits.
Figure 3-36.
Profit-Taking Rule Shown on the Chart for Sysco
Generally
speaking, when you see a big sudden move after you take a position, that
is a windfall profit, and it is a good idea to go ahead and take that profit.