Bank of East Asia stock prints high recurring trading pattern

False break, re-test sequence a highly recurring chart pattern

Bank of East Asia (ticker: 0023.hk) has a lesson-perfect chart pattern: one that has proven time and again high recurring. The sequence goes like this 1. push price to key level such as 52-week high 2. generate a breakout 3. fade the breakout 4. come back to re-test former resistance.

Bank of East Asia (0023.hk) weekly chart  June 2010 - present

Bank of East Asia (0023.hk) weekly chart June 2010 – present

Concepts to note:

  1. 52-week highs and lows are ‘hard’ levels that will not re-print once the year is over. Therefore they are invaluable levels for reference.
  2. Price is constantly testing resistance, support levels to find direction. The longer the level has been around, the more valid they are, the higher likelihood of coming back.
  3. Be mindful of breakouts. False breaks are highly recurring phenomenon in the market. Should they fail, they mark turning points that could lead to big corrections.
  4. Fading breakouts is a time-tested trading strategy that can deliver big profits in stocks and forex.
  5. Traders should always remember key events especially crashes e.g. Shanghai-Hong Kong Connect, August 24 2015 Black Monday, 24 June ‘Brexit’ for example. These are high impact events where the market psychology and associated levels can impact the market for a long time.
USDJPY weekly chart December 2013 - present

Forex trading display same behaviour such as this USDJPY example; Weekly chart December 2013 – present

 

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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