Price Patterns:
Double top and Double bottom
Follows DOW Theory & Cannot contradict DOW theory
Pattern Criteria and marking – Equivalent Tops and bottoms, Volume should be high / Good fight
Identify 2 equivalent tops or bottoms
Duration should be minimum 1 month
Head and Shoulder & Cup Pattern:
Time
Eager to sell in short span = Head and shoulder
Gradual = Cup Pattern
Heavy hand involved – Distribution and Accumulation pattern
Takes months on end to achieve
Shoulder head shoulder pattern & 3 months minimum
High volume @ lower shoulder
Bearish trend reversal – Someone is liquidating the stock
CUP Pattern:
Accumulator & Long term buyer
Longer duration to form Cup shape pattern should be evident
Correlation of the market movement should be low
Against the market or decouple from market
Lack buster volume should form the rounding bottom
Long position can be created when the cup is getting filled
FLAG Pattern:
It happens at the early stages of the pattern
Its based on Demand and Supply understanding
Steeper pole and the way it looks with triangular shape – Line or Candle chart can be used to identify –
Buying in a shorter span
Happens early
Pole should be steeper – 75 to 80 Degree – Aggressive Buyers
Rectangular price pattern expected in 3 – 7 days
Volume should be low during the Flag
Break out is expected from here
Identify the steeper pole
Identify the rectangular price movement – moves sideways
If price comes down – then i should be disqualified
Low volume during the flag – No selling is happening
a Long Position can be created and could become aggressive
TRIANGLE Pattern:
Degree is the key
No Steeper pole is required
Trend consolidation
Generally takes 45 days to form
Criteria:
ABCDE – A = bottom and always higher than the one before
The line connecting should form a triangle
Volume should be high
Breakout can go up or down,… shows results
