Posted this chart this morning on $AXP. This is a swing trading setup, but can be played down to the hourly if you're comfortable with trading options.
I wanted to share this because it's one of the nicest, longest running wedge patterns in the markets. $AXP responded heavily to the economic slowdown in March, and has been in a wedge ever since. I want to dive a little into the thinking that goes behind this analysis. Now for those of you that are newer to our methodology, don't worry, I'm currently working on videos and guides to help you.
One of the best things about using this "modern auction theory" method of technical analysis, is that it doesn't really matter what time frame you use. You can mold it to fit whatever you want to trade on whatever timeframe, so long as you have access to volume information.
Top down, very much like we reference in the ATP course, there are 3 items that are key to identifying a chart as a potential trade. Using $AXP here as an example:
1. Expansion Move
Do we have a large initial expansion move that precipitated the current market range? Yes, in March $AXP reacted poorly to the covid meltdown, and is now wedging.
2. Decision Points: Battle between buyers and sellers
Do we see conflict and can we identify the areas of importance for buyers and sellers? Yes. That's what we call a DP, decision point, and there are many in this range. This particular range is developing into a wedge pattern. One of our favorite examples of buyers and sellers fighting for balance, converging energy into one single point. Exciting.
3. Volume Do we have volume confirmation?
Yes! Volume is converging along with price and we are forming a very clear and defined bell pattern in the volume at price. The volume at time (at the bottom) is showing signs of big pushes from buyers, and big pushes from sellers. We are starting to see cracks. Time to watch.
Now you can trade this with shares or with options. I recommend options if you know how to use them. And yes, don't worry, I'm making materials on how to trade with options. This is my preferred method for swing trading. Day traders, you might want to use this as a general bias at the daily or weekly level, then looks for and apply the same analysis to smaller timeframes. Just like we do in the course.