*I used line chart to see the formation clearly although the pattern is also visible in the bar and candlestick charts.
It appears that a head and shoulder formation has formed on the weekly charts - which is very hard for me to ignore.
Book definition of head and shoulder pattern:
1. Needs a prior trend to reverse.
2. Left shoulder that marks the high point of the trend.
3. Head forms as a higher peak forms, exceeding the previous high. After peaking, the low of the subsequent decline marks the second point of the neckline. The low of the decline usually breaks the uptrend line, putting the uptrend in jeopardy.
4. Right shoulder forms as price advances from the low of the head which is lower than the head. The decline from the peak of the right shoulder should break the neckline.
5. Neckline forms by connecting the two lows.
Neckline break(most important part of the pattern): The pattern is not complete and the uptrend is not reversed until neckline support is broken. Ideally, this should also occur in a convincing manner, with an expansion in volume
6. Once the support(neckline) is broken, it would now turn into the resistance level. Sometimes, but certainly not always, the price will return to the support break, and offer a second chance to sell.
7. Price target is projected by measuring the top of the head to the neckline. The distance is subtracted from the neckline to reach a price target. However, the price target should only serve as a rough guide. Other factors like previous support levels, Fibonacci retracements, or long-term moving averages should also be considered.
AGI Chart Analysis:
1. Check.
2. Check.
3. Check.
4. Check.
5. The two lows(green circles) are pointing at 11 as the neckline. Price breaking and closing below 11 would complete the pattern.
Initial target after breakdown: 9.04 (9)
Resistance after breaking down: 11
Will it break the support? RSI reading gives the clue on possible price movements in the short term.
False alarm? Currently looking to range trade.
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