Samwise Quick Reference Handbook
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I am so beyond done with this rally, nothing ever goes the way it’s expected to.., wouldn’t surprise me if it just consolidated for another month and then break out again!
Crazy how NVDA is continuing to pump
Nvidia is looking like it’s forming a double-top breakdown right now. It never really broke through its $200 century mark. Two tests of $210 failed.
Hi Sam,
Technical question regarding potential ascending triangle pattern forming on the QQQ hourly and daily chart. After the October 10th dump we saw the QQQ form an ascending triangle from the lows of $590, making higher lowers in subsequent days, eventually resolving the pattern and breaking out at the top of the triangle. Looks like we’re seeing something similar again to a smaller extent; however, we are pushing towards the late end of the current segment in terms of late stage segment % and to a lesser extent, duration. We’re pushing against the mid-century mark top price range so perhaps there is a price ceiling here. The tepid price action in the last few days slightly suggests otherwise as well, but one could argue the price action after the 10th was particularly volatile as well. If the ascending triangle here resolves itself that would signify an upside target of the $640-645ish range, which would fall within the expected top range we’ve been discussing.
What are your thoughts on this?
Thanks!
So to begin with, for sure there’s no ascending triangles in either case on the daily chart. That huge reversal we saw on the daily chart, takes the idea of an ascending triangle out of the equation entirely. For a multitude of reasons.
First, Acending triangles are very bullish formations and huge reversals run totally counter to that. That reversal we observed on October 10 relative to the size of the preceding trend and volatility profile on the QQQ is far far too sharp to establish a basis for an ascending triangle.
The key thing with triangles is the preceding trend needs to be far more explosive than the move down that begins the triangle. So for example, within the context of a 23-piont sell-off, we’d have needed to see something like an 80-point rise going into it with similar volatility. So big 20-points moves up. Or even 70 points of upside. So like $540 to $613 in relatively short oder followed by a sharp move down to $590 would make some degree of sense especially if the move up from $540 up to $613 was equally as explosive as the move down.
Whenever there’s an ascending triangle intraday or developing on the hourly, that’s key.
Next we would hav needed to see multiple points of contact to establish an actual ascending triangle. That means we’d need to see the QQQ rebound right back up to $613 exactly, peak and pull-back to a higher low, rally again to $613, pull-back to a higher low and establish 3-points on the lower trend-line. Two points isn’t really a trend. 3 or more points confirm the trend. Ideally, in an ascending triangle you’d have four with high symmetry — meaning the highs would reach right up to $613 exactly and the lows would form an actual clear-cut uptrend. You wouldn’t have jagged lines anywhere.
The outsized move down relative to the trend coupled with the lack of multiple points establishing a lower trend-line sort of removes the ascending triangle bit there.
For me, the breakout isn’t ascending triangle based, it’s just due to resistance being breached on a double-top breakout.
As to the hourly chart, the biggest problems are this. First, the move up needs to a smooth continues rise. The breakout move from $600 to $637 is a PERFECT example of the type of move that makes up the flag pole portion of the triangle. It needs to be a smooth clear-cut move up or at least in an identifiable trend without a breach.
The triangle portion needs to be in exact lock-step pattern wise iwth the preceding move up.
Meaning if it teas 18 hours to rise 18-poitns. It should take 5 hours in order to drop for hte 5 points creating the first pull-back. Does this make sense.
The very fact that the QQq dropped 20 points in like 3 hours pretty much causes any ascending triangle to evaporate because that push down is extremely bearish in angle relative to the trend.
It doesn’t have to be exact 18-hours up to 5 hours down and equal points or anyting. But it needs to be relatively close or within reason.
For example, the move up from $600 to $637 and the ensuing action is more triangle based than anything that came before it.
It’s the exact type of action we might see in a very bullish environment intraday on the 1-minute or 5-minute chart.
Also, the volatility isn’ all jagged either. With triangles it’s smooth. You get smooth line up, a smooth line down, smooth line right back up to the highs, one back down to form a point on the lower trend-line, a move back up to the highs etc.
You don’t have a lot of junk or volatile trading in between that where we’re drawing what might be a triangle.
You can get away with that type of thing when drawing up double-tops or double-bottoms or even when drawing out head & shoulders becuase those patterns speak to something entirely different than ascending, descending or symmetrical triangles. They’re just a different category altogether.
Right now, we have what its he potential of a symmetrical triangle forming on the QQQ due to the smooth line up to $637 from $600, the pull-back from $637 down to $626 and the rebound up to $635. If the QQQ had gone up to $637 exactly, we’d have a potential ascending triangle, but again, it would need multiple points to establish. S o we’d need another pull-back and another move up to $637. Take a look at some of the charts I’m posting here.
Notice how in the chart I post above, we only have 2 points on the upper trendline and 2-poitns on the lower trend-line. That means the QQQ hit 613 a share, pulled back to $589, rallied back to $613, pulls back to $600 and then just broke out. That’s no more than just a double-top breakout really.
For ascending triangle, we’re missing a third point minimum. So with ascending triangle, after the QQQ had pulled back to $600, it would have rebounded again to $613, topped and puled back to $606 or $608. then rebounded again and that coiling is what would lead to the explosion higher. As the QQQ forms higher lows and on a well established trend-line and peaks at the same high point on a line of resistance, the breakout is forced by either causing the QQQ to violate the lower trend-line or the resistance line.
Anyway, what I’ve learned over time is that when it comes to triangles, when one forms, you know it clear as day. When it’s uncertain, it’s probably not that. And here we have too many things pointing against it.
Now when looking at the move from $600 up to $637, you do you have substantially stronger evidence for a symmetrical triangle — which breaks both ways.
We would have needed to see something a lot more similar to that move for the one at $613 to be considered an ascending triangle.
So we’d have needed to see the QQQ move cup in a relatively straight line from $550 up to $613, and the pull-back would probably needed to be al to more measured and smaller. Maybe a pull-back that stops at $595 on a controlled descent relative to the trend. A move back up to $613 etc.
Here’s an analysis of the current hourly in terms of the triangle forming. Compare this to what occured in the $590-613 zone. Notice how the pattern is far cleaner. There is no question as to what is happening here. We do have a symmetrical triangle in the forming if we get the other points of contact first. But we need those other points of contact. whiteout them, we have no triangle.
We need 3 points of contact to establish a trend.
Now to answer your question, let’s consider it. Let’s suppose the QQQ forms a symmetrical triangle and breaks out. No big deal. It just means we go to $646 as expected. yOu can have a triangle breakout that leads to a top right at our point near $646. Notice that in a symmetrical triangle, the breakout point is likely to be somewhere near $633-634 a sahre. It break out 10-points and top.
That would all be in-line without overall thesis. It’s not impacted by a symmetrical triangle.
QQQ gap down