Having been a chartist for the best part of 30 years, and having applied this particular art to the markets in public for 20 years, what works and what does not work in terms of predicting (or attempting to predict) price action stands out more and more. In particular, the so-called “Falling Wedge.”
Perhaps the best example of the genre amongst the more followed stocks of the moment comes in the form of Stobart Group which broke out of its May Falling Wedge on Friday accompanied by rising volume. One would expect at least a move to the 50 day moving average at 122p, especially while the broken May resistance line at 105p provides support.
WH Smith is also demonstrating a Falling Wedge formation. But the difference in this case is that we still await the breakout at 1,983p, also the level of the 200 day moving average. What makes this especially attractive is the gap higher for the stock on Friday – gaps ahead of wedge breaks are normally a sign of momentum and a cue for aggressive traders to go long ahead of the break. The obvious target here would be April resistance at 2,200p plus while the recent 1,900p support zone holds.
Finally, we have Versarien, which like WH Smith, gapped up within its wedge on Friday – suggesting strong momentum. Above its April resistance line at 107p could lead the stock back to main 2019 resistance at 140p plus. Only back below the gap at 98p would suggest that the stock was set to disappoint.