Wednesday, November 4, 2009

Expanding Wedges on VIX

I've read that an expanding wedge pattern near the top after a prolonged upward movement is bearish, a topping pattern.

What about an expanding wedge near the bottom, after prolonged downward movement? Is it bullish? Bearish? Anyone?

Because that seems to be what I'm seeing in the VIX daily chart. Not just the index movement, but also RSI, MACD, and slow stochastics (12,3).


  1. Hi,

    Always an awkward one this.

    The rare expanding triangle!

    The down move is becoming more and more volatile, sometimes with rising volume.
    The rising supply trendline is bullish in this instance, and this pattern is usually restricted to a trend reversal.

    There is every chance that this will become a symetrical triangle or diamond pattern (If I can work it out I'll post a chart to explain), anyway the price can contract and return to a narrow wedge with rising volume resulting in a break out, Usually half to two thirds toward the axis.
    After such herculean conflicts, extended trends are highly probable.

    I would say nobody can predict the future, however watch for confirmation volume when the break happens (Upwards IMO).
    I'll try to post the chart now.

    Best regards and watch out for false signals on the break.

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  3. Also your RSI during the down move has been finding support on the 30 level, it now seems since August this has changed to the 45/50 level.

    There is a final? test (this month), of the RSI 30 level and a double bottom with new support convicingly on the 50 level.

    When the RSI changes ranges in this way, it indicates good price acceptance and is likely bullish. The opposite is obviously true when the range rules change back.

    As a guide for a bear market, RSI will oscillate within a range of 20 to 30 at the low end of the scale up to an upper resistance zone of 55 to 65 regardless of market or time horizon.
    In a bull market, RSI will shift and begin to oscillate within a range marked by a support zone of 40 to 50 toward an upper resistance zone of 80 to 90.
    Check this out using historical charts (useful for trend reversals).

    Can you let me know how to post a chart here.



  4. Thanks for your comment, Mark, sorry I missed. I would love to see the analysis of "diamond" pattern and how it's supposed to break, but I have no idea if you can post a chart on a comment section.. I guess you can upload a chart on the net somewhere and post a link here.