There are various patterns. Double top and double bottom, head and shoulder, flag and triangle. These tools give trader direction to trade in short term. These are accumulation and distribution patterns. Unlike Dow theory these patterns study the charecteristics of demand and supply. They are very powerful tools for a trader.

  • : Cup pattern Flag pattern Triangle pattern Double top and double bottom Head and shoulder Candle sticks;Doji; piercing; hammer; hanging man etc.
  • : Price patterns. Study charecteristics and nature of demand and supply. Dow theory does not consider this, they accumulation and distribution, price, volume and duration are used to study charecteristics of demand and supply and trends in price movements
  • : Double top: follows Dow theory. Open chart and identify tops and bottoms. Identify two consecutive equal/equivalent tops. Duration should be minimum one month. Volume should also be high at second top. The price should breach the neckline. If this happens we can create short position.
  • : Double bottom is reverse of Double top. Open the chart and identify tops and bottoms. Identify two equal/equivalent Double bottoms. The duration must be minimum of one month. Volume should be high at second bottom. If the price breaches the top of the first rebound Long position can be created
  • : Distribution pattern. Graphically easier to identify. Takes longer time to form. Minimum of 3 months. High volume should be visible at the left shoulder. This happens when stronger hand is trying to sell large volume of stocks by selling more and buying less. Volume should be low at the right shoulder which indicates distribution has happened. This is bearish trend and short position can be created below the neckline.
  • : Accumulation trend. When one wants to accumulate large volume of shares in a short time. It is reverse of head shoulder. This represents bullish trend. Long position can be created if price goes above the top when head rebound.
  • : Cup pattern is an accumulation pattern. When one wants to accumulate the stocks at his convenience and price cup formation happens. Hence it takes long time.long time trader gradual accumulation. Cup pattern should be visible. Market movement should be low. Lackluster volume will form rounding bottom. Long position can be created when cup starts getting filled. But you should hold the position for a long time to read good returns. it is a powerful pattern.
  • : Flag is powerful and is watched by the market. There surge in buying in the initial stage. This period is represented by pole. Pole should be steep may be 75 to 80 degrees. Price then moves horizontally in rectangular fashion forming a flag. If price shows downward trend, then it will not qualify for a flag. Flag formation takes 3-7 days. Volume should be low during the flag. Breakout should happen on the same side. When price goes above the top of pole, long position can be created. This is powerful in short term.
  • : In flag pattern entry price is when breakout happens and price breaches the price at the top of the pole. Volume should be high here. Here long position can be created. Stop loss is at the bottom of the flag. Upward price at least equivalent to the risk being taken will be exit price.
  • : Unlike flag the pole here need not be steep. Indicates trend consolidation. Takes a minimum of 45 days to form. There should be 5 wave. The bottom and top of second wave should be higher and lower than first and trend should continue. When lines connecting the tops and bottoms are extended it should form a flag pattern. The volume at breakout should be high. Breakout can happen on both sides. Good breakout should happen at 70% of the triangle.
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