The Anatomy Of Analog Devices (ADI)Posted: July 14, 2013
The below chart of Analog Devices (ADI) strikingly conveys the theory of “the trend is your friend”. But looking more closely, I have highlighted instances where chart patterns (specifically Head & Shoulders). These patterns give more confidence in holding or selling the stock.
Starting in 2009, ADI formed a H&S bottom (highlighted in the first box) and broke out starting its rally to this date.
The second box illustrates a H&S top that failed and the stock continued to rally.
Third box shows a H&S Top which probably had a lot of people selling/shorting the stock. Although the stock reached its breakdown target, it did not violate the trendline in place since mid 2009.
Fourth box show a continuation H&S bottom that broke upwards.
Recently, ADI formed a 5-months H&S bottom that broke out with an implied target of 52.
If this chart beautifully illustrates one thing, it is how chart patterns greatly increase the confidence of your trade and clearly defines boundaries in case of accumulation of the stock.