25. June 2012 17:58
A quick note today where I want to highlight the difference between a good looking chart and an ugly chart. To be clear I only go for the pretty ones!
So, what constitutes pretty?
- Clear support or resistance.
- An absense of long-tailed bars.
- We want charts that have an air of order about them because they're representing "technical" trading activity which is far more predictable than messy charts.
- We also like an OVI that wiggles around and isn't permanently horizontal.
So, let's take two charts so you can see the difference.
The first is UPL. As a pure chart pattern, this is quite pretty. The bars are neat and there's an easily identifiable pattern (cup and handle with bull flag) with a clear resistance. While unspectacular the OVI is currently positive and has been so for a while now, while also tending to wiggle every day. In the past you can see it was a bit horizontal, but it's been more constructive in the last month or so.
The second chart is for HON, which currently displays very little in terms of chart pattern. Also it's a bit gappy with long bars and unpredictable price action. The only decent thing is that its OVI at least does wiggle, but without a decent chart pattern that doesn't even come into play.
All the best