One of the main principles of technical analysis is the idea that history repeats itself to a certain degree. Which gives you the ability to guess the more likely scenario of the future direction of a stock. However, I do have to state that this is not a foolproof method. In the financial markets, nothing works all the time. So, keep that in mind when using technical analysis to make trading or investment decisions.
AB INBEV
AB Inbev only recently broke out of a 5-month long consolidation but it hasn’t really moved anywhere since. The first consolidation that broke out on the 9th of November took the shape of a rectangle. Granted, it was not a textbook rectangle but the correct characteristics were there. The stock is again in a consolidation that has taken the shape of a smaller rectangle. For a continuation pattern to complete, a breakout of the upper boundary needs to take place. However, the current candle shares some similarities with the candle of the last inflection point of the first consolidation that broke out in November. The candle is classified as a hammer-pattern. I do not place much attention to candlestick patterns on their own but in combination with other technical occurrences or indicators, they can be quite helpful. In this case, the candlestick pattern formed at the lower boundary of a rectangle consolidation which does give the candle some significance.
We could see AB Inbev move higher in the coming weeks if we use the move that occurred out of the first consolidation as a guide. Yes, the pandemic is still affecting the company and is arguably one of the biggest catalysts for the stock but that doesn't mean you should write the stock off. Do note however that only a breakout of the upper boundary will signal the completion of the pattern. But, if you want to be early, this could be an interesting area to buy the stock.
