*Price pattern follows Dow theory.Price pattern explains both demand & supply and nature & significance of market.
*Some of price patterns are*Double Top/Bottom*Head & shoulder*flag *triangle patterns.
*When a chart is plotted,if there are two equivalent tops(very much similar)it is said to be double top.
*conditions-*Two equivalent tops.
*The duration should be atleast one month.
*volume should be high at second top.
*If price goes below previous bottom ,short position(bearish) can be created
.*When a chart is plotted,if there are two equivalent bottoms(very much similar)it is said to be double bottom.
*Conditions-*Two equivalent bottoms.
*The duration should be atleast one month.
*Volume should be high at second bottom.
*If price goes above previous top,long position(bullish) can be created.*Formation of shoulder,Head(Tall),shoulder is said to be Head & shoulder.It is distribution pattern..
*Conditions-*shoulder-Tall Head-shoulder.
*Duration should be 3 months.
*High volume at left shoulder & low volume at right shoulder indicates stronger hands already moved out.so create short position(bearish)if price goes below neck line.*Formation of shoulder,Head(lowest bottom),shoulder is said to be inverted head & shoulder.It is accumulation pattern.
*Conditions-*shoulder-Lowest bottom Head-shoulder.
*Duration should be 3 months.
*High volume at left shoulder &low volume at right shoulder.If price goes above neckline long position can be created(bullish).*Cup pattern is accumulation pattern.It resembles the shape of cup on chart.
*conditions-*Duration is longer(more than a year).
*low volume at rounding bottoms.
*Bullish trend can be created if cup gets filled.
*Stepper pole,price movement side wards forming rectangle shape & breakout on the same side is said to be flag pattern.
*Conditions-*Formation of steep pole(65-80 degree).
*Price movement sideways(Rectangle shape).
*Duration 3-7 days.
*Significant volume during breakout.*The five waves A-B-C-D-E should form a triangle while connecting tops & bottoms.
*Conditions-*The 5 waves should form triangle structure.
*The duration should be 45 days.
*The breakout is expected around 70% & should have high volume.