Quiz Tuesday: Extended V Bottoms…

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I show a V-bottom chart pattern with an extension, as ABC on the slide. C is the extension. Think of the extension as a handle. Look for price to make a straight-line run
down (A to B) with few or no pauses, often fitting inside a channel. Price at the bottom of the V will form a one-day reversal, island reversal, or tail, usually on heavy volume,
perhaps gapping upward. After price reverses at the bottom (B), price climbs for a bit then moves sideways to down (C), in the extension, before continuing higher. The pattern should be 3
weeks to 3 months
wide. When price peaks on the right side of the pattern (D) and then retraces, the stock must close above that peak to stage a breakout. The breakout in this example happens at E. Let’s
see if you can find some extended V-bottoms in the next slide.

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I show two extended V-bottoms on this chart. Care to try again in the next slide?

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Find as many extended V-bottoms as you can.

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This extended V-bottom drops from the peak at about $8 and gaps lower, making its way down to the V bottom where price reverses. It rises to B where the stock
moves lower initially but then tilts upward. A breakout occurs when the stock closes above the top of the right peak (B), which happens at A. On the next slide, we’ll test how to trade them.

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This is an extended V-bottom. Price peaks on the right at B, closes above it at A, signaling an upward breakout. How far up will price go? Will it stop at line C, D, E, or
none of the above? The answer is on the next slide.

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The correct answer is line C as the chart shows. It’s the ultimate high for this pattern (meaning price drops at least 20% below the peak at C).