In technical analysis, transitions between rising and falling trends are often signaled by price patterns

  • : price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, Price pattern studies play a large role during technical analysis. When data is plotted there is a pattern which naturally occurs and repeats over a period. Price patterns are used as either reversal or continuation signals.
  • : Dow theory explains the movement of the trend with respect to demand and supply, whereas price patterns explains the nature and characteristics of the trend and also its significance.
  • : The double top is a frequent price formation at the end of a bull market. The double top pattern shows that demand is outpacing supply (buyers predominate) up to the first top, causing prices to rise. The supply-demand balance then reverses; supply outpaces demand (sellers predominate), causing prices to fall. After a price valley, buyers again predominate and prices rise. If traders see that prices are not pushing past their level at the first top, sellers may again prevail, lowering prices and causing a double top to form. It is generally regarded as a bearish signal if prices drop below the neck line.
  • : A double bottom is the end formation in a declining market. It is identical to the double top, except for the inverse relationship in price. The pattern is formed by two price minima separated by local peak defining the neck line. The formation is completed and confirmed when the price rises above the neck line, indicating that further price rise is imminent or highly likely. Most of the rules that are associated with double top formation also apply to the double bottom pattern. Volume should show a marked increase on the rally up while prices are flat at the second bottom.
  • : Head and Shoulders formation consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. -Significant rally prior to Head and should structure indicated the trend reversal. -The Head should be the highest among the recent price action. -Generally, the Volume during the L . Shoulder should be highest. -Duration to form the each pattern (Shoulder,Head,Shoulder)is min 1 Month. -R shoulder volume should be as low as possible.
  • : An inverted head and shoulders, also called a head and shoulders bottom, is inverted with the head and shoulders top used to predict reversals in downtrends. Investors typically enter into a long position when the price rises above the resistance of the neckline. The first and third trough are considered shoulders, and the second peak forms the head. A move above the resistance, also known as the neckline, is used as a signal of a sharp move higher. Many traders watch for a large spike in volume to confirm the validity of the breakout. This pattern is the opposite of the popular head and shoulders pattern but is used to predict shifts in a downtrend rather than an uptrend.
  • : The Cup pattern indicates the gradual accumulation of stocks by strong hands, which happens at longer duration. The rounding bottom will be visible with cup shape and low volume in overall trend. Condition for bullish: Cub shape should be visible with line charts with longer duration. During the rounding bottom the volume should be low. The correlation of the market movement will be low,i.e the market movement does not affect the stick price positively or negatively.
  • : If the price trend is seen in the type of flag, i.e the steeper pole and side way movement and followed by the breakout on the same side is identified as flag pattern. Condition to quality FLAG: Steeper pole with approximately 70 degree steep Rectangular shape side way movement with low volume after the steep(forms with in 3 to 7 days) Breakout on the same side with high volume. The flag should not drift down, if happens flag significance will be lost.
  • : Entry price should be just after the breakout Exit price should be just after the price movement has reversed its direction Stop loss should be at the point where the breakout gap is filled
  • : The line chart pattern in the form of 5 waves(A-B-C-D-E) should construct a triangle while connecting the tops and bottoms ,with the duration of 1.5 months. Condition for triangle: Visible triangle formation while connecting tops and bottom in straight line, triangle area should be 1.5 months duration. Triangle can breakout in any direction but high volume during breakout.
1 Comment
  1. Naresh 3 years ago

    Hi,
    You’re doing well.

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