http://clcheung.wordpress.com/2013/10/07/ztrader-box-indicator/

Oct 7, 2013

 

In various trading patterns, I think the Box pattern is the most simple to understand and yet most powerful.

 

In this example, this stock’s ATR reducing gradually and at the up break point comes with a huge volume. Certainly the best example we can find this year.

 

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Although it looks like it is easy to capture the box break out, actually it is not. Look at # 777 recently:

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On Aug 19, the volume increase with a fake up break, and the closing restored to the previous box range. Later on, the momentum pick up and ATRN goes upward, a real up break occurred. The technical difficulty on the implementation side is the fake up break or down break which may affect your assumptions of the definition of a box. You may get confused at the fake up break and down break points. Entering or leaving at wrong and fake break point is common.

 

In Apr this year, # 0777 had demonstrated a box down break. But this stock is strong, it recoved with a high volume and get back to the previous box trading range after a few weeks:

 

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Sometime Boxes formation indicates the stock is entering a different trading range:

 

 

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So it can combine with other indicators to confirm the trend. For example, after Sep 16, box up break with a high turnover, , # 0980 is traded on a new range. Aug 28 is confirmed as an inverted head and shoulder, CMF and momentum is healthy, today high turnover up break (the green dotted line is the PV resistance line extended from the last peak):

 

 

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