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5 Big Stock Charts You've Got to See to Believe

Huaneng Power International

Last up is Chinese power generation firm Huaneng Power International (HNP), another stock that's forming an ascending triangle pattern.

With any technical chart, I think it's most valuable to think about patterns in terms of what they represent rather than thinking in terms of shapes that don't mean much (triangles, rectangles, wedges). For HNP, the resistance level at $29.75 has acted as a sort of ceiling for shares because it's a price above which there's a glut of selling pressure. In other words, it's a price where sellers are more eager to sell and take gains than buyers are to buy.

At the same time, the higher lows of late mean that buyers do have some conviction right now. If they can take out those sellers at $29.75, it makes sense to be a buyer.

Declining volume over the course of the pattern is a good thing too. Ideally, we want to see volume decline over the course of a pattern as those asks above $29.75 get absorbed by buyers, then a volume spike when shares break through that resistance level. The spike indicates participation in the trade. As with AMT, it's a good idea to not be early in an ascending triangle trade; wait for the breakout, then buy.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.

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