How to catch Momentum using ADX and Cup and Handle formation
Mar 29, 2022
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It is possible to capture massive moves in stocks using price patterns along with simple indicators like the ADX (Average Directional Index). Check out how we selected LEMONTREE which has rallied more than 14% within 2 trading sessions.
ADX- The average directional index (ADX) is a technical indicator used by the traders to determine the strength of a trend. It commonly includes three separate lines. These are used to assess whether momentum is building on the stock or not.
We published the following research on Lemon Tree pre-market on 28th March 2022 in "The Financial Waves Short Term Update” which our subscribers receive pre-market every day.
LEMONTREE Daily chart as on 28th March 2022 (Anticipated)
LEMONTREE Daily chart as on 29th March 2022 (Happened)
Wave analysis as published on 28th March 2022
Anticipated- On the daily chart, in the previous session prices formed a bullish candle. A cup and handle is a technical chart pattern that resembles a cup and handle where the cup is in the shape of a "u" and the handle has a slight downward drift. Price has closed above 60 which confirm breakout of cup and handle pattern. We have shown ADX indicator which gives an indication if the stock is trending or in a trading range. The low readings of ADX indicates that the stock is in a range. The ADX of this stock is 31.16 giving an indication of a trending market. The reading above 25 means strong directional strength.
In short, trend for this stock is positive. Use dips towards 59.5-60 as buying opportunity for a move towards 66-67 levels as long as 57.5 holds on the downside.
Happened- After we published the report on 28th March(premarket), prices kept moving higher and within 2 trading session itself the stock hit our target of 66-67 levels and made a high near 71.2 levels. In such market scenario, within 2 trading session, the stock has given more than 14% return.
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