Saturday, March 30, 2019

IMA S.p.A. : high wave pattern.

With regard to the chart of IMA, we can notice a high wave pattern. 
It is a particular candlestick pattern that underlines the market indecision. In this way, after the full year 2018 data release, and after a bullish trend, with the break of the previous congestion area, the bullish trend stopped. The market maker is evaluating the situation.
Indeed, the buyers, at the closing, left (the long upper shadow of the candle changed into a small real body). In the same way, the sellers left, for the reason that the long lower shadow changed into a small real body: there was strong volatility with a rebalancing of the positions sellers-buyers. 
See the following chart and the pattern. 

Chart from

The upper and lower shadow represent respectively the resistance and the support area.
The market will make a decision when there will be a break of the support or of the resistance line.
As usual, we need other confirmations. In this sense, it is useful to check the pattern requirements.
In the high wave pattern, there are some conditions : 
  • A small real body ;
  • A long upper shadow ;
  • A long lower shadow ;
  • The length of the upper/lower shadow should be three times the real body.
With regard to the last one, we can observe that :
  •  O (open) - C (close) = small real body = 66.60 - 66.25 = 0.35
  •  H (high) - O (open) = long upper shadow = 68.50 - 66.60 = 1.90
  •  C (close) - L (low) = long lower shadow = 66.25 - 62.80 = 3.45
The pattern requirements are met because :
  • 1.90/0.35 = 5.43
  • 3.45/0.35 = 9.86
Finally, let's look at the market mood and at the next trading sessions, to understand the intentions of the market players. For greater clarity, the following image shows what I explained before.

High wave pattern

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