Different types of price patterns like Double top and Double bottom, Head and Shoulder, Flag and triangle.
It gives the characteristics of the trend better than DOW theory. Double top and double bottom should have min 1 month duration and second top or second bottom should have high volume and double top makes bearish trend and double bottom makes bullish trend.
Head and shoulder should have min 3 months duration and high volume at left shoulder than right and we can expect a breakout while it crosses the previous bottom. Flag have steeper pole and min 3-7 days steady price movement and low volume during these. Flag should not drift lower and it can make breakout at the same side. Triangle have 5 triangle wave points to create triangle area and it takes 45 days to form.Breakout mayy happened around 70% of the triangle in either up or down. Cup pattern forms due to the accumulation in the market and it happens in a gradual way and it takes longer times to form.When the cup fills, breakout may happen.
- : 1. Double top and double bottom 2. Head and Shoulder, Cup pattern 3. Flag and triangle
- : Dow theory is the basic to derive demand and supply by the trend.It gives either the trend is in positive/negative but not giving the characteristics of the trend where price pattern gives the characteristics of the trend.
- : Find the equivalent tops in the trend and the duration between the tops should be 1 month. The volume at the second top should be high. In these conditions when the trend cross the previous bottom, its a bearish trend and we should make Short position.
- : Find the equivalent Bottoms in the trend and the duration between the bottoms should be 1 month. The volume at the second bottom should be high. In these conditions when the trend cross the previous top, its a bearish trend and we should make Long position.
- : Head and shoulder is Accumulation/Distribution price patterns. It should fulfill the following criteria - Identify Shoulder-Head-Shoulder - Min 3 month duration to form - Left shoulder should have high volume - Right shoulder should have low volume - when the price goes below the neck line we can create short position.
- : Inverted Head and shoulder is Accumulation price patterns. It should fulfill the following criteria - Identify Shoulder-Head(Lowest)-Shoulder - Min 3 month duration to form - Left shoulder should have high volume - Right shoulder should have low volume - when the price goes above the neck line we can create long position.
- : The cup pattern is for Longer investment and its a gradual accumulation. - Volume to be low when it reaches bottom - It takes longer duration - Can take long position when the cup fills
- : In Flag pattern there a surge and parallel movement in trend. - Identify the steeper pole (70-80 degree) - Parallel movement of price for min 3-7 days - Volume should be low during parallel movement - Flag should not drift lower - Can expect breakout in the same side.
- : Entry Price - Its a price where it cross the previous top/bottm Stop loss - Lowest bottom of the the flag.
- : In triangle takes min of 45 days to form. - Identify the triangle waves in the trend - It takes Min 45 days to form - Volume should be high during triangle - Breakout may happen during 70% of the triangle in either up or down.