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Question: What do you call it when a dog eats your wedding ring?
Answer: A diamond in the "Ruff."
OK, that was lame. I admit it. I have something on Emblem’s chart I’d like to share with you that will make up for it though. Here is how the joke fits in. For a while the share price of Emblem has been having “ruff” times. After it fell off that cliff if we take a closer look at what has happened to Emblem after it gapped down we can see a diamond forming in those lower prices.
Behold the diamond bottom. This is not as common a chart setup as others you are likely to encounter, but none the less this is one you will want to take action on. You may be slightly familiar with the diamond top. However this particular setup on Emblem is the diamond bottom and as you can see this is a bullish indicator indeed. Diamonds build under pressure, much like the lower prices that have been observed here. The prices start a bit tight off the bottoms then become more volatile and then begin to tighten again. This price action after the lows is what forms a diamond like shape (using appropriate lines and a bit of imagination of course). Once we have identified this pattern we will want to wait for a bullish break out confirmation to get in, or since we are off the lows you can consider getting in right away knowing that a stop can clearly be placed if it does fail. This decision will of course depend on your risk tolerance. What makes this chart set up that much more shiny is that we know we have a gap to fill on the way back up for Emblem. For more info on gaps please refer back to our October edition.
Emblem Corp. (TSXV: EMC)