Hi Jim,

Thanks for your comments I am glad you like the site.

I took a look at the chart of PDN which I have included below:


I do not have access to a good charting package with ASX quotes so I am stuck using Yahoo finance but we will do our best here regardless. In my opinion as I outline in my lesson on the head and shoulders pattern, this pattern is valid only when found in uptrend as it is a reversal pattern. So at least on this chart I am not seeing the head and shoulders although it may show up more clearly on a chart with a shorter time frame.

Secondly on the chart here I show that the RSI was oversold but has since turned up and is about to touch the 50 line, which would in my opinion be more of a bullish sign than a bearish sign.

If you do see the stock trade back down to $4 then yes this could be considered a double bottom depending on how sharp the movement is if that does happen.

The pattern on this chart that jumps out at me however is not any of the above but the triangle pattern which I have outlined on the above chart.

If there are any other thoughts on this one feel free to post them below.

Best Regards,
Dave

Hi Dave

Thanks for your reply.
On the new chart i've pasted for you current as of 18th April I wanted to ask your further insight into what you would do at this point as a pro?

I'm assuming that if it goes up higher from here and reaches around the $6.40 zone that it confirms my previous observation on my anitial question to you that a double bottom had occured.

Would it be correct to now lower the angle of the bottom line of the triangle to the new lower point recently hit from the lines that you drew on your chart that you pasted?
Or would you leave your triangle in place if it pulls back up to that point of where your triangle was drawn?
Or do you see other pattens now that my untrained eye isn't seeing?
Also does a double bottom have to fall to the exact spot as the previous bottom to ( in this instance to around $3.80 ) to even contemplate a possible double bottom occuring in advance of it possibly rising up to match the middle high point inbetween the two bottoms in this case around $6.40?



best of luck to you and anyone whom might read this post if you trade on this one if this pans out correctly to my possible beliefs as noted above if they become fact.

cheers
Jim

Hi Jim,

Glad to hear from you again.

Let me start by saying that I don't trade ASX listed stocks so what I would do here is not trade the stock because I am unfamiliar with the market. I also have to say here that I am not registered as a financial adviser as I am not seeking to give trade recommendations but simply to provide an educational service.

With this in mind from an educational perspective when looking at the below chart it seems that the market did break below the bottom triangle line that we drew in the original post and which I have included in the chart below. It also seems that it did this on relatively high volume which is what I personally like to see with this type of setup.


It seems however now that the stock is rallying a little bit and is testing that original bottom triangle line which is a fairly common occurrence to the point where some traders will wait for a retest before going short.

So with this in mind I think most traders would not move the original triangle line.

If the market does rally from here I think most traders would also agree that this is a double bottom formation as the two points which form the double bottom I think most would agree do not have to be at the same level.

Lastly I think most traders would agree that if the two points which form the double bottom are not at the same level then it is better to have the second point be a little higher as it is here because this indicates that the bears are having trouble pushing the market lower.

If anyone else has any thoughts on this feel free to post them below.

Best Regards,
Dave

The market cap of $2.64bn at $4.30 (AUD) has to in my opinion be taken into account. No doubt this company will face many problems before becoming profitable. It's cost of production in the near future could quite conceivably be quite high. Although I believe that Uranium will be a major future fuel by necessity, the spot price has dropped a lot. In addition, there are a lot of companies coming into production. We also have the major players entering into new contracts at $30 (eg. ERA). I am no expert, and it is only an opinion, but in the short term I would not be surprised if it fell below $4.00 (PDN). Then again, we have ERA trading at a PE of 50. Beyond that, it really depends on the market generally and the spot price. However, given the above, why would the spot price rise in the short term? By the way, do not take Google Market Caps as being gospel. My research indicates that in this case it is near enough for most purposes. In conclusion, in my opinion it's anyone's guess. The big question I have is why would ERA enter into contracts below $30 when the spot price is $75? I notice it has dropped to $65. No doubt that has a lot to do with the stock price. With the price down and unable to sell all output, profits would be down. So, I am not suggesting buy or don't, I am just indicating a few pros and cons. From what I have read, PDN have done everything right thus far, and may continue to do so. Some things however it cannot control, and these are the worry.
Here is a site that provides a little insight :-

Commodity News And Mining Stocks: Buy, Sell or Hold Paladin Energy (PDN:TSX)

Brian

Hi Brian,

Well put and you obviously have some good insight for us on this part of the market so we hope to see you around the forum in the future.

Best Regards,
Dave

Hi Dave

Thanks for your last reply.
And also thanks to Brian for sharing your thoughts too.
I thought I'd load another chart of PDN current as of 9th May 08.



Can you add some educational input on what the chart is doing now?
The chart is a slight fuzzy i'm assuming to the uploading method so if anyone hasn't got a zoom function on their PC then just to let you know the last Three days were all up days.
I'm assuming the original observation about the double bottom formation is close to being correct or would you say its correct at this point?
In your last reply you mention about the Setup. Did you mean that the price once fallen below the bottom line would test that line and from a trading point of view would be the confirmation of the setup indicating to go Short at that point. if that is correct then i;m assuming some folks who know these movements went short on it to ccause it to fall to a lower level to which it did which gives us more of a defined image of the double bottom to which the Shorts were then closed hence it then rallying up as it has done.
Funnily enough i read an article a couple days ago how PDN has been one of the biggest shorted socks on the ASX for some time now. On that note whats your educational view on Shorting as apposed to going Long is there a general consensus that one is better for profits than the other. Is shorting a much quicker way to make profits?

couple of educational view questions.

From an educational purpose when it comes to drawing lines to form triangles and such on a chart, is there a rule of thumb of it being only for candlestick charts and also when it appears that you could draw many differnent angles what is the common criteria that makes the most sense to draw lines through for ultra accuracy please, such as should a top line for instance be running accross the top of 3 or more candles over time in perfect line?


Also on another unrealted note to PDN can you elaborate please on your thoughts on GAPS or point me towards some worthy info?
I always see people making comment on things like ( the stock will retrace now as it has to fill the gap). From my own observations i notice gaps on everything left right and centre on all stocks all the time and am wondering if GAPS actually do play any solid fact that they need to be filled.
and if gaps indeed end up being filled would one be correct in interpreting that happening that the stock is being manipulated by someone deliberately or at leeast to the point where serious traders are atemptin to control its movement? I realise its a bit of a far fetched question especially on a stock that has massive frequent volumes on it.

I hope i'm not wasting your time with my questions.
I'm only using PDN as an example for educational purposes myself due to its chart being clear and volumes large enough for my own clarity purposes.
once again thanks in advance for your time and info you provide.
My aim is to one day be in full control of everything I've been learning from you and your website.

sincerely
Jim

Hi Jim,

Nice to hear from you again.

Yes I would say that there is a double bottom in place on the chart.

not exactly. When trading triangles some traders will enter a short position on the break of the lower line and some will wait for a break and then enter a position on a retest of the original support line. I talk more about this here:

Nice GBP/USD Trade with Analysis Attached

At the end of the day there are so many variables that can move the market I don't think you can say that one thing or another was responsible for the move however what you have outlined above is one possible scenario.

I think this is really a matter of preference however from a longer term perspective I think that the general concensus is that it is easier to make money going long than it is short. The two major reasons I would cite for this are that 1. stock markets as a whole normally go up over the long term and 2. when you go long your loss is generally limited to the price of the stock however when you go short your loss is theoretically unlimited.

Here are several good links on drawing trendlines. Generally the same guidelines apply when plotting any line on a chart whether it is a trendline, triangle etc.

Drawing Trendlines : Trader Mike

More on Trendlines : Trader Mike

Afraid to Trade.com Blog » Assessing the Validity of Trendlines


Here are some good links which go into what creates gaps as well as some different strategies that some traders use to trade them:

How to Trade Gaps from Swing-Trade-Stocks.com

The Three Types of Gaps from AfraidtoTrade.com

One of the main reasons this site exists is to have conversations like this one so you are not wasting my time. What I would ask from you or anyone else that has knowledge to share is that you look through the ask/answer question of the site when you have time and provide insight where you can. The main goal of this section is to get conversations going and I could use some help there so anything you can do would be appreciated.

Best Regards,
Dave