A saucer. You know...those tiny, pointless plates Brits put their little teacups on.
Well, they’re not totally pointless, since they gave “saucer” (the technical charting pattern) its name.
A saucer on a graph looks like just like a real-life saucer: a shallow U-shape. Time is on the x-axis, and share prices are on the y-axis (vertical). That means a share’s price has gone down over time...slowly...and then slowly recovered, going back upwards.
Like all technical tools concerning stocks, saucers aren’t meant to be used in isolation. They need vibrant social lives, just like you. Their preferred friends? The envelope channel pattern and standard trading channel pattern. If you know what a Bollinger Band is, it’s a type of envelope pattern. Envelope patterns are long-run price trackers. Standard trading channels are just the standard version of mapping out resistance and support lines for a stock. Traders who do this correctly can expect the security to stay within those price lines.
For instance, a saucer, sloping gently downward and then upward, oftentimes forms at the support trendline. A stock has been sold off a bit, lowering the price to the bottom of the saucer. But it has support, keeping it floating at the support line. If an investor has done their homework and math correctly, they can expect that price to be as low as it will go. That would be a great time to buy, since traders make money off of buying low and selling high.
Let’s celebrate those gains with a cup of tea, shall we? Right-e-o.
