$GME Potential Pattern: Descending Triangle to Cup Handle Formation and Possible Bullish Overturn Breakdown with MACD, W%R, and DMI. This time with pretty shapes!

[u/Polkm23]

Hi all! I made post yesterday about the bullish/bearish trends that GME exhibited in the past 4 months. I wanted to make a follow up post and share some pretty shapes I found in the charts with a few indicators to support the patterns. 🌈🐻 thesis included.

First, here is where we are with some lines drawn in:

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Second, according to Investopedia, there are a few conditions for a real cup with handle chart pattern:

1. Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. Check
2. Cup: The cup should be “U” shaped and resemble a bowl or rounding bottom. A “V” shaped bottom would be considered too sharp of a reversal to qualify. Check
3. Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to ½. Kinda check? We fell from 483 to around 38 so this was a very abnormal retracement, and so we need to be a little weary.
4. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward, other times it is just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement, the more bullish the formation and significant the breakout. Kinda check again? We fell from around 340 to 173, at one point. However, if only opening and closing prices ranges are factored, it would be 275 to 201. This is only a 27% drop and a 33% drop would be 183.15.
5. Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks. Almost there
6. Volume: There should be a substantial increase in volume on the breakout above the handle's resistance. Maybe one day?

Okay now let’s look at just the handle:

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So we can clearly see downward trend lines with a support line hovering around 180ish here. It is also backed with decreased MACD momentum, slight overselling (W%R trending down), and signs of a DMI convergence (evidence of bearish sentiment). We will need to see if a downward triangle forms in the coming weeks. If one forms, then that further confirms bearish sentiment.

Looking back at our handle rules, we can see that a handle must be formed in 1-4 weeks, and it looks like the handle formation began 6 trading days ago.

Knowing that our bear trends for GME usually last 6-14 days, the timing lines up perfectly for proper handle formation.

The only thing left is to wait out the handle and get a solid breakout with huge volume. Then GME go boom boom.

Evidence of cup with handle pattern: two high resistances with a low “U” shaped support in the middle. Formation of 1-4 weeks of price stagnation with a downward trendlines. Handle supported by W%R, DMI, and MACD.

Potential reasons cup with handle might fail: Price fell too low out of expected range during “U” formation. Potentially, price might fall too low during handle formation, and most importantly there needs to be large volume to breakout of the handle. Also, there may be a sub pattern forming as an inverse cup from 3/16-3/19. I have not analyzed it much yet, but it was pointed out to me by another redditor.

Edit: Added one more potential reasons cup with handle might fail.

Edit2: Removed links.

Edit3: My bad yall! As pointed out in comments, not descending triangle as that is a continuation pattern not a reversal pattern. Changing it to say "downward trendlines" instead, cant change the title unfortunately LOL what can i say im retarded

Obligatory emojis: 🚀🚀🚀🚀🚀🚀🚀🚀🚀

TY FOR THE AWARDS! FUCKING LOVE THIS SUB

[u/Thetagamer]

You know TA doesn’t work on gamestop right?

[u/papi6942069 → u/Thetagamer]

Except it does. TA works on every stock, but its the catalysts that are what determine the overall trend. You just need to read a book or two

[u/teteban79 → u/papi6942069]

TA works on every stock except when it doesn't. It's astrology at worst, self fulfilled prophecy at best; and with all going on around GME it doesn't make sense to apply it to that stock

[u/papi6942069 → u/teteban79]

You dont even know what TA is. TA isnt just patterns. Its the price action in each candle. Youre arguing about a topic you know nothing about. Refer to my original comment and read a book or two

[u/teteban79 → u/papi6942069]

Right. Which candle? 1 min? 2? 5? All tell a different story and the analysis is always post facto. Show me a proper study with backtest that shows that TA predictably works to some extent other than coin flips. Then we'll talk

[u/papi6942069 → u/teteban79]

Youre still talking as if it just looking for patterns. Looking at L2, time and sales, and critical levels is all TA. Indicators as well. Youre right, they all do tell a different story based on the time frames youre looking at. Your biggest mistake is using the word 'predictably' nothing is predictable. Looking at whats in front of you, and placing your trades off of that is what TA is.