Peter Brandt is my trading hero. Whether it’s a blog post or an interview for Market Wizards, Brandt has an intoxicating way of describing classical charting principles. 

Indescribably one can’t help but get excited about charting when reading Brandt’s work. It’s one of the reasons why I re-read Diary of A Commodities Trader every January. 

My other annual Brandt read is his Best Dressed List. The Best Dressed List is Brandt’s review of the best classical charting patterns he found during the year.  You can read his 2019 Best Dressed report here. 

This year Macro Ops created its own Classical Charting breakout alerts service. Our goal for the year was simple: Identify and trade the best-looking classical chart set-ups. 

We’ve documented the best trades from this year in this essay. 

Each section represents a specific chart pattern and the best set-ups in those patterns. We’ll also provide details like chart pattern length and number of days to reach the price target. 

In an ode to the legend Brandt himself, please enjoy our Macro Ops Best Dressed List of 2020. 

Rectangle

Nautilus (NLS) 

• Chart Pattern Length: 32.4 weeks
• Days To Reach Price Target: 4

NLS was a great example of a stock breaking out and never testing its chart pattern boundary. Those that took profits at the profit target were spared the massive crash in March. 

That said, the stock now trades >$19/share. There’s always a give and take to profit targets. 

Limited Brands (LB)

• Chart Pattern Length: 28 weeks
• Days To Reach Price Target: 11 

LB broke out of its 28-week rectangle trading range and never looked back. We were lucky to catch the earnings pop, which got us to our profit target in less than two weeks. 

Highpoint Resources (HPR)

• Chart Pattern Length: 45 weeks
• Days To Reach Price Target: 8

HPR was a picture perfect short trade based on its breakdown from the rectangle chart pattern. Notice that the stock broke down below its 20MA and 200MA. 

American Eagle (AEO)

• Chart Pattern Length: 15 weeks
• Days To Reach Price Target: 2

AEO developed serious volatility compression which coincided with a breakdown from its rectangle chart pattern. Price broke down below its 20MA and 200MA, adding higher probability to our bearish thesis. Those that held beyond the price target were handsomely rewarded. 

A-Mark Precious Metals (AMRK)

• Chart Pattern Length: 23 weeks
• Days To Reach Price Target: 3

AMRK is one of our biggest winners of the year. Traders that held past the price target received $30/share in profit on the trade.

Notice that the stock breaks out above 20MA and 200MA without seriously testing our stop-loss placement. Then the stock rides the 20MA without breaking below that line until August 2020. 

Dermtech (DMTK) 

• Chart Pattern Length: 77 weeks
• Days To Reach Price Target: 3 days

DMTK was an interesting play. Look at the first two tests of the support boundary. Notice how the stock traded below the support line then closed either at or above the line. This shows buyers are willing to pay at that price. The stock broke out above the 20MA and 200MA and never tested the stop-loss placement. 

Tobii AB (TOBII)

• Chart Pattern Length: 14 weeks 
• Days To Reach Price Target: 12 

TOBII broke out of its 14-week rectangle reversal base and never retested the chart pattern. The stock closed with a strong bullish candle, retraced for two days, and rocketed higher. Those that held past the price target were handsomely rewarded. 

New York Times (NYT)

• Chart Pattern Length: 10.6 weeks
• Days To Reach Price Target: 9

NYT broke out of a volatile rectangle pattern. The pattern formed in 11 weeks and closed with a strong daily bull bar. The stock never looked back and rode the 20MA to the price target (and beyond).

Epiroc AB (EPI_A)

• Chart Pattern Length: 11 weeks
• Days To Reach Price Target: 22

EPI_A is another testament to the power of a stock respecting its 20MA. After a minor retest of the chart pattern boundary, EPI rocketed to its price target in only 22 days. Those that held after the price target generated even greater returns. 

Volvo (VOLV_B)

• Chart Pattern Length: 9.8 weeks
• Days To Reach Price Target: 10 days

VOLV was a beautiful trade for a couple reasons. First, it had a clean breakout and well-positioned Last Day Rule stop-loss. This allowed us to size big while risking (at most) 100bps. The stock hit our price target in 10 days before reversing in a sharp correction. 

Peloton (PTON)

• Chart Pattern Length: 5.4 weeks
• Days To Reach Price Target: 9

PTON was one of our largest winners. As you can tell, the stock originally broke out of a long-term inverse Head and Shoulders pattern. The rectangle we traded was a continuation pattern on the daily time frame. Those that held beyond the price target generated upwards of $100/share in profit. 

Celsius (CELH)

• Chart Pattern Length: 32 months
• Days To Reach Price Target: 44 days

CELH broke out of a 32-month rectangle base and never looked back. The stock rocketed >120% in less than two months. CELH is a perfect example of the power of longer-term chart pattern developments. Stocks that breakout of long-term bases have a lot of dry powder behind them. 

Ligand Pharmaceuticals (LGND)

• Chart Pattern Length: 35 days
• Days To Reach Price Target: 3 

LGND broke out of its rectangle pattern and quickly reached our price target in 3 trading days. This is the perfect trade because we can turn over our edge faster. Leading to greater compounded gains. 

Ascending / Descending Triangles

Ciner Resources (CINR)

• Chart Pattern Length: 20 weeks
• Days To Reach Price Target: 8 days

CINR showed signs of price weakness before the March crash as it broke below its support of a 20-week descending triangle. It took 8 days to hit our price target but those that held longer received much higher returns. 

County Bancorp (ICBK)

• Chart Pattern Length: 11 weeks
• Days To Reach Price Target: 3 days

I don’t like trading banks. But sometimes a chart appears so tantalizing I can’t help myself. ICBK was that chart. The stock broke below its 20MA and 200MA and took 3 days to reach our price target. That said, those that held longer generated ~$10/share in profits. 

Westlake (WLK)

• Chart Pattern Length: 12 weeks
• Days To Reach Price Target: 53

WLK broke out of its 12 week ascending triangle pattern and reached our price target in 53 trading days. The breakout coincided with a sharp rebound in the overall market. Again, we use individual stocks to time our entries and exits, not the general market. 

The stock experienced a sharp pullback on its way to the price target. Those that used the 200MA as their stop-loss target stayed with the trend the entire time. 

Midea Group (000333.HK)

• Chart Pattern Length: 30 months
• Days To Reach Price Target: 85 

Midea Group is another example of the power of long-term price consolidations. The stock broke out of a 30-month ascending triangle and reached its price target in 85 days. Notice how the stock never broke below the 20MA on the weekly chart on its way to the price target. 

Aesthetic Medical (AIH)

• Chart Pattern Length: 12 weeks
• Days To Reach Price Target: 16

AIH completed a perfect descending triangle after breaking below its support and 20/200MA. The stock took ~2 weeks to reach its price target without once testing the chart pattern boundary line. 

Editas Medicine, Inc. (EDIT)

• Chart Pattern Length: 16 weeks
• Days To Reach Price Target: 7

EDIT became one of the year’s best trades by accident. We featured the name as a potential H&S top (you can see the formation if you look closely). Yet as the stock failed to break down we noticed a potential break out from a descending triangle. 

We alerted members to this chart “morphology” (as PLB calls it). The stock took off and reached its price target in 7 trading days. Those that held a few more days generated another ~$38/share in profits.

 

>>Continue to Part II >> for 20 more charts in the categories of Symmetrical, Head & Shoulders Top, Inverse Head & Shoulders, and Cup & Handle, including not only stocks but some currency pairs, commodities futures and crypto.