Mitra: Showing the way?!

Recently, Mitra  broke above the upper line of its expanding triangle and then rallied higher. It is in a correction mode today.


Chart 1: Mitra's weekly chart as at Feb 17, 2015_9.30am (Source: ShareInvestor.com)

Expanding triangles are not common. In fact, they are fairly rare. More often, we will come across triangles or pennants where the prices would tend to converge in the future. This is simply a function of price discovery- as the buyers and sellers would slowly agree on the equilibrium price. Expanding triangles, on the other hand, are the opposite of a market where the buyers and sellers are moving towards a state of equilibrium. In fact, they are getting far & farther apart until there is a breakout. In the case of Mitra, the buyers "won" and the share price rose.

Now we can see the same pattern forming in two stocks: SKPRes and Penta. Both stocks have not yet achieved a breakout. The correct approach is to regard the upper line as a resistance and to sell at this line. Only on breakout above the line, should you open a position in the stock.


Chart 2: SKPRes & Penta's weekly chart as at Feb 17, 2015_9.30am (Source: ShareInvestor.com)

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Mitra, SKPRes & Penta.