price pattern tells us the characteristics of the demand and supply earlier. Dow theory fails here. double top/ bottom, flag pattern, triangle pattern, cup pattern, head and shoulder pattern.

  • : double top/bottom, flag pattern, triangle.
  • : price pattern tells us the characteristics of the price movements/ demand and supply which Dow theory fails to tell.
  • : 1. two equivalent tops should be marked. 2. 2nd top must be high when compared with the 1st top + high volume on the 2nd top or afterwards. 3. minimum duration between the two tops must be 1 month/ 20 days. 4. short position or bearish trend can be done when the price level crosses the previous low point.
  • : 1. two equivalent bottoms should be marked. 2. high volume should be traded at 2nd bottom or afterwards. 3. minimum duration between two bottoms=20days/1 month. 4. long position or bullish trend can be considered when the price movement crosses the previous high between the two bottoms.
  • : 1. mark two equivalent top left shoulder (L.S) and right shoulder (R.S) with high head (H) in-between them [L.S-H-R.S]. 2. minimum gap bwtween L.S and R.S must be 3 months. 3. high volume of trade must have happened at L.S. 4. when price pattern of R.S crosses the bottom of L.S, then short position or bearish trend can be identified. here the head part with low volume confirms some strong hands presence who is buying and selling the stocks.
  • : 1. mark L.S-H-R.S bottoms. 2. minimum duration between L.S and R.S must be 3 months. 3. high volume of trade must have happened at L.S than R.S. 4. price of R.S should have crossed the top of L.S , then long position can be followed with bullish trend.
  • : it looks like a bottom of cup or mild curve and it should be visible. 1. it takes long time to form. 2. volume is expected to be low during the whole cup pattern formation. 3. correlation between market and stock should be low during mid of the pattern. 4.once the rounding bottom breaks, it indicates the upward or bullish trend. it confirms gradual accumulation of stock.
  • : it looks like the flag flying beside the flag post. 1. a steeper pole like price shift should be marked. (MORE THAN 70 DEGREE STEEP) 2. rectangular sideways movement of price. like a flying flag. 3. duration - 3- 7 days. 4. positive pole flag move in the same side direction- upwards => positive breakout. 5. with high volume traded during the breakout.
  • : entry price- after flag breakout. exit price - after bullish trend breaks. stop loss- fixed at the breakout point.
  • : when the price wave top and bottom is connected with two line, it will look like a triangle. 1. 5 wave connecting patting(A, B, C, D, E) with alternative bottom and top marking. A, C, E- bottom; B, D- top 2. total triangle area time duration- 40 days/ 1.5 months. 3. breakout may happen on either side, with high volume. 4.triangle breakout may happen at 70% zone. 5. entry should happen after breakout breaks the triangle top/bottom.
  • : entry, exit and stop loss in head &shoulder and cup pattern?
  • : entry, exit, stop loss in flag & triangle? Example diagram.
1 Comment
  1. Naresh 4 months ago

    Hi,
    This is an appropriate trade plan for bullish flag pattern:-
    Your entry should be just above the breakouts of the consolidation range
    Set a stop loss just below the flag formation
    Your target should be based on the height of the flag

    Trade plan for triangle pattern-
    Entry Price = Breakout point just above the upper trend line for buying and break down point just below the trend line for short selling.
    Exit Price = the height of a triangle at its base or widest part from the entry point.
    Stop Loss = just outside the pattern on the opposite side from the breakout point. For example, if buying an upside breakout, place the stop loss just below the lower trend line and if going short on a downside break out, place a stop loss just above the upper triangle trend line.

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