Key medium term breakout area for TSX 60

The TSX 60 index may have some upside in its future if it can make it above a key trend line. This trend line connects the highs from July 25 to the pivot high from August 17, as outlined in the chart below.

A break of this trend line could lead to medium term upside

Since Wednesday of last week, the TSX 60 index has been consolidating sideways underneath this trend line. This resulting bullish flag pattern means that the trend line should provide only minimum resistance.

A breakout above this trend line would be significant as this is a medium term 60 minute chart. I'll be looking to go long here for 1-3 days depending on how fast the price moves up. First resistance on any such breakout will be at the 200 moving average and the gap fill at 795. Secondary resistance will be at the pivot top at 804. A close back below the blue trend line triggers a stop out.

The XIU.to ETF is a good way to play this breakout, as well as individual stocks. If I find any stocks with supporting bullish patterns I'll post them here.

Trend line breakouts--identifying prevalent patterns

Every day I see hundreds of chart patterns play out. Some patterns I take note of while other less reliable ones I ignore. This can vary on a weekly or even daily basis. Today, my chart pattern of choice was the trend line breakout.

To find a trend line, simply connect multiple highs or lows with a line--the more pivots that connect, the better the trend line. Notice how this works on the SPY intraday chart below. I personally played this breakout for a move to approximately 115.25.

SPY 10 min shows clear break of trend line leading to higher prices

Trend lines are a useful addition to any trader's repertoire due to their reliability and straightforwardness in knowing when the trade is working in your favour or not. A break above the trend line is the buy signal and a break back below is the stop out.

Once a trend line has been identified on one of the major indices it's very likely that this pattern will repeat itself on individual stocks. The following charts are trades I took in sympathy to the SPY pattern above.

Notice the POT.to trend line double as an inverse head and shoulders pattern

Trend lines can also be bought on a retest of the initial breakout

The 200MA was the logical target on this SU.to trend line breakout

Identifying prevalent patterns from one day to the next is just as important as identifying key active stocks and sectors. When you see a pattern playing out in the major indices and key large cap stocks, you'll likely see it elsewhere as well. This is a strategy I use in my own trading every day.

TLT weekly resistance--possible bounce in stocks coming?

The iShares 20 Year Treasury Bond Fund (TLT) has run into major resistance on the weekly chart.

If you connect the last two pivot highs, you form a trendline that stretches all the way back to late 2008. The third hit of any trendline is usually a high probability short, especially when they're as nicely spaced as on the chart below. 

Treasuries often trade contrary to stocks as institutional investors look for refuge in seemingly safer assets. Note the vertical lines in the S&P 500 weekly chart below--this is where each pivot high on the TLT corresponds. You'll notice that each time the TLT makes a top, the SPX is either near or at a sharp up-side move.

It's unclear if this pattern will repeat itself again, but there are several reasons to believe that it might. The market is extremely oversold right now as well as extremely bearish. History shows that when sentiment hits an extreme, it's often a sign that a turnaround is near. This combined with a possible pivot high in the TLT leads me to believe that stocks may be due for some short term upside in the near future. 

If the market does bounce, I won't be expecting much--possibly a retest of the highs at 1350 or 1375. As you can see, the previous two pivot lows in the SPX were consecutively smaller declines leading to shallower bounces. 

I'll be watching this correlation closely in the days and weeks ahead. If Treasuries rally sharply higher from here, or if it pulls back while stocks continue to decline, I'll know the pattern has been negated.