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During the breakouts from the pattern. The buy & sell order should be done when the price crosses the neckline with respect to the previous top or bottom range according to the price pattern. If the breakout is upward, then go long otherwise go short.
Double top – short
Double bottom – long
Head and Shoulder – short (right breaks the neckline)
Inverted head and shoulder – long position
Cup pattern – long
Flag pattern – long
Triangle pattern – shortDepending on the patterns, buy when there’s a bullish trend at the point of breakout and sell in a bearish trend at the point of breakout.
The inverted head and shoulder pattern is a accumulation pattern.
– Should have significant rally before the trend.
-period of the trend is 3 months
– left shoulder should have high volume
-head should be high
right shoulder should have no significance in volume
long position can be made after breakout
Price patterns is one the widely used technical analysis to identify the entry and exit point of the trade.
Listed below are buy and sell point for different types of price patterns : –
Double Top –> If A and B are the equivalent top and C is the resistance identified during the double top formation, then we can short sell as soon the downtrend from B breaches the Resistance level i.e, C.
Double Bottom –> If A and B are equivalent bottom and C is the support identified during the double bottom formation, then we can take long position as soon as the uptrend from B breaches the Support level i.e, C.
Head and Shoulder –> a) Wait for the complete formation of the pattern and short the position as soon as soon as the right shoulder breaks the Neckline.
b) In inverted Head and Shoulder create a long position as soon as the right shoulder breaks the Neckline.
Cup Pattern –> When the cup pattern is identified , we can create long position as soon as the break out happens above the price point of the two peaks in a cup.
Flag Pattern –> A Flag can be used as a continuation pattern, if a Bull flag is formed during the uptrend we can create a long position if it breaks out in the uptrend with significant volume.
Similarly in a Bear Flag during the downtrend we can create a short position if it breaks down in the downtrend with significant volume.
Triangle Pattern –> After forming the triangle pattern the stock usually breaks out at around 70% zone, If the break out is uptrend with significant volume create long position and if the break with significant volume create short position.
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