In technical analysis, the various changes in the prices are examined by price patterns.
when the prices changes in trend direction, it is called as reversal pattern.Mainly used to examine the current market movements and forecast the future moments..
Through this have understood the concepts of pattern formation such as Double top, Double bottom, Flag pattern and triangle pattern.

  • In technical analysis, the various changes in the prices are examined by price patterns.
    when the prices changes in trend direction, it is called as reversal pattern.Mainly used to examine the current market movements and forecast the future moments.

  • Dow theory explains the concept of Trend but failed to give the characteristics of prices.
    Price pattern explains the characteristics of prices and its various patterns.

  • When the two equivalent tops are formed in between particular time period(Min 20 days) with respect to high volume examination is called Double top.

    When the price crosses below the previous lower bottom, we create a short position which is called as Bearish Trend.

  • When the two equivalent bottoms are formed in between particular time period(Min 20 days) with respect to high volume examination is called Double Bottom.

    When the price crosses Above the previous high top, we create a long position which is called as Bullish Trend.

  • Right shoulder volume should be low as possible and if position is breaking down the neck line of previous bottom we can determine bearish trend

  • It is a significant rally prior to Head and shoulder structure indicating trend reversal. When the volume is high and if it crosses above left shoulder and the prices goes in steep way, we can determine bullish trend

  • Cup patterns are powerful and it takes long time to construct.
    During the rounding bottom, the lower volume is expected.

  • A steeper pole with rectangular shaped sideways is called as flag pattern.

    It usually take 4 to 7 days to form.
    when a positive pole is noted, flag should give the positive breakout forming the bullish pattern and during the breakout the volume should be high.

  • Entry price should be just above the breakout.
    Exit price should be when the trend starts taking reverse direction.(Mostly amount of risk , reward is determined)
    Stop loss is placed at the point of breakout filled area.

  • It is a 5-wave corrective pattern where both buyers and sellers are very aggressive which forms a triangle shaped structure.
    Duration of this formation should be 1.5 months and the breakout is mostly expected at 70% zone with high volume.

  • Need more clarity on head and shoulder pattern.
  • can we apply head and shoulder pattern in daily charts.
2 Comments
  1. Suresh Surulimuthu 3 years ago

    @amreentaj
    Your analysis is good. Keep going !

    I would like to attempt your questions.

    Head and shoulder is basically a reversal pattern. The name head and shoulder is so because graphically the pattern resembles two shoulders and a head in between shoulders. The pattern contains three successive peaks with the middle peak (head) being the highest and the two outside peaks (shoulders) being low and roughly equal. The reaction lows of each peak can be connected to form support or a neckline.

    The conditions:
    1) It takes at least three months for this pattern to form.
    2) The left and right shoulders are roughly equal.
    3) High volume takes place in the left shoulder (LS)
    4) Low volume in the right shoulder (RS) because the stronger hands are already sold out.
    5). Short position can be initiated when the price breaks below the neckline.

  2. Author
    Amreentaj 3 years ago

    Thank you so much for the details!

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