Technical Analysis

Technical Analysis covers various aspects of technical analysis, such as chart patterns, indicators, and price action, to help traders understand the market better. You can find technical analysis of different financial instruments information, including stocks, commodities, and currencies.

Head and Shoulders Bottom Chart Pattern

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Head and Shoulders Bottom Chart Pattern

Implication

A Head and Shoulders Bottom is regarded as a bullish indication. It suggests a potential reversal of the existing downtrend into a new uptrend.

Description

The Head and Shoulders bottom is a famous pattern with traders. This pattern marks a reversal of a downward trend in a economic instrument’s cost.

Amount is completely important to a Head and Shoulders Bottom. An trader will be searching for improving amounts at the point of breakout. This enhanced amount definitively marks the end of the pattern and the reversal of a downward event in the amount of a inventory.

The neckline is a crucial factor of this pattern. The neckline is developed by attracting a line attaching the 2 large amount tips of the enhancement. The 1st high point happens at the end of the left shoulder and starting of the downtrend to the head. The second marks the end of the head and the starting of the downturn to the right shoulder. The neckline generally points down in a Head and Shoulders Bottom, but on unusual events can mountain up.

The pattern is accomplish when the opposition marked by the neckline is “broken”. This happens when the amount of the inventory, increasing from the low point of the right shoulder moves up through the neckline. Multiple specialized experts only consider the neckline “broken” if the stock closes above the neckline.

head-and-shoulders-bottom-chart-pattern

It is most important to observe amount at the detail where the neckline is broken. For a true reversal, specialists consent that significant amount is important.

Variations of the Head and Shoulders Bottom

There are a few notable variations for this pattern.

Multiple Head and Shoulders Patterns

Many valid Head and Shoulders patterns are not as well identified as the classical head with a shoulder on either side. It is not unusual to see more than two shoulders and more than one head. A popular variation of a multiple Head and Shoulders pattern contains two left shoulders of more or less equal size, one head, and then two right shoulders that imitate the range and structure of the left shoulders.

Important Characteristics

Following are important characteristics for this pattern.

In a classic Head and Shoulders Bottom, the left and right shoulders hit their relative low points at approximately the same price and level. In addition, the shoulders are usually about the same distance from the head. Experts like to see symmetry but variations are not lethal to the validity of the pattern.

Volume

In a well-formed pattern, the slope will not be too steep, but don’t certainly promotion a improvement with a steep neckline. Many experts think an upward sloping neckline is additional bullish than a downward sloping one. Others say slope has little to do with the stock’s degree of bullishness.

Duration of Pattern

Consider the length of the pattern and its relationship to your investing time horizons. The duration of the pattern is regarded to be an signal of the period of the impact of this pattern. The longer the pattern the longer it will take for the amount to achieve the desired amount. The shorter the pattern the sooner the price move. If you are considering a short-term trading possibility, look for a structure with a short length. If you are considering a longer-term trading possibility, look for a pattern with a longer length. The length of the pattern is sometimes called the “width” or “length” of the pattern.

Need for a Downtrend

This is a reversal pattern which marks the transition from a downtrend to an uptrend.

Slope of the Neckline

In a well-formed pattern, the slope will not be too steep, but don’t automatically discount a formation with a steep neckline. Some experts believe an upward sloping neckline is more bullish than a downward sloping one. Others say slope has little to do with the stock’s degree of bullishness.

Trading Considerations

Duration of the Pattern

Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to reach the Target Price. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration. The duration of the pattern is sometimes called the “width” or “length” of the pattern.

Target Price

The target price provides an significant indicator about the possible cost move that this pattern indicates. Consider whether the desired price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not currently been obtained.

Inbound Trend

The inbound trend is an significant attribute of the pattern. A shallow inbound trend may suggest a period of combination before the cost move recommended by the pattern begins. Look for an inbound trend that is extended than the length of the pattern. A good rule of thumb is that the inbound trend should be at least two times the length of the pattern.

Criteria that Supports

Support and Resistance

Look for a location of support or opposition around the target cost. A region of cost combination or a powerful Support and Resistance Line at or around the desired price is a strong signal that the price will move to that point.

Location of Moving Average

The Head and Shoulders Bottom should be be below the Moving Average. Analyse the place of the pattern to a Moving Average of recommended duration. For short duration patterns use a 50 day Moving Average, for longer patterns use a 200 day Moving Average.

Moving Average Trend

The Moving Average should change direction within the duration of the pattern and should head in the direction indicated by the pattern. For short duration patterns use a 50 day Moving Average, for longer patterns use a 200 day Moving Average.

Volume

Volume will usually be highest on the left shoulder and lowest on the right.

A strong quantity spike on the day of the pattern verification is a intense indication in support of the possible for this pattern. The amount spike should be substantially above the typical of the volume for the period of the pattern.

Other Patterns

Other reversal patterns (such as Bullish and Bearish Engulfing Lines and Islands) that occur at the peaks and valleys indicate strong resistance at those points. The presence of these patterns inside a Head and Shoulders is a strong indication in support of this pattern.

No Volume Spike on Confirmation

The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable.

Location of Moving Average

If the Head and Shoulders Bottom is above the Moving Average then this pattern should be considered less reliable. Compare the location of the pattern to a Moving Average of appropriate length. For short duration patterns use a 50 day Moving Average, for longer patterns use a 200 day Moving Average.

Moving Average Trend

Look at the direction of the Moving Average Trend. For short duration patterns use a 50 day Moving Average, for longer patterns use a 200 day Moving Average. A Moving Average that is trending in the opposite direction to that indicated by the pattern is an indication that this pattern is less reliable.

Short Inbound Trend

An inbound trend that is significantly shorter than the pattern duration is an indication that this pattern should be considered less reliable.

Message for you(Trader/Investor): Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7. Each week you will receive your Course Materials. You can print it and highlight for your Technical Analysis Training.

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Flag Bearish Chart Pattern

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Flag Bearish Chart Pattern

Implication

A Flag (Bearish) is considered a bearish signal, indicating that the current downtrend may continue.

Description

A Flag (Bearish) follows a steep, or nearly vertical decline in price, and consists of two parallel trendlines that form a rectangular flag shape. The Flag can be horizontal (as though the wind is blowing it), however it often has a slight upward trend.

The vertical downtrend, that precedes a Flag, may occur because of buyers’ reactions to an unfavorable company announcement, such as a court case, or a sudden and unexpected departure of a CEO. The sharp price decrease is sometimes referred to as the “flagpole” or “mast”.

Bearish_Chart_Pattern

The rectangular flag shape is the product of what technical analysts refer to as consolidation. Consolidation occurs when the price seems to bounce between an upper and lower price limit. The Flag (Bearish) pattern formation reflects the reaction of sellers who are willing to sell at a lower cost, and the influx of buyers who inadvertently drive up the price as they compete to buy at the best possible price.

A bearish signal occurs when the price rebounds beyond the lower trendline of the Flag formation, and continues the original downward price movement. This is considered a pattern confirmation.

When speaking about Flags, technical analysts may use jargon and refer to the flag as “flying at half-mast”. Visually, this reference is nothing like a flag at half-mast, such as on a day of national mourning. Instead, this term refers to the location of the flag – at the mid-point of what would otherwise be a continuous downtrend.

Important Characteristics

Following are important characteristics for this pattern.

Trendlines

Flags are very similar to Pennants. However, with a Flag, the price trendlines tend to run parallel, whereas with a Pennant, the price trendlines tend to converge. John J. Murphy notes that a price drop below the lower trendline may indicate the resumption of the downtrend.

Volume

As the Flag develops, the volume tends to decrease. However, you will often notice a sharp spike in volume at the end of a Flag, whether it is bearish or bullish.

Duration of the Pattern

Martin Pring notes in his book, Technical Analysis Explained that “Flags can form in a period as short as 5 days or as longs as 3 to 5 weeks.” John J. Murphy identifies that Flags “often last no longer than one or two weeks.”

Trading Considerations

Possibility of Price Reversal

In some rare cases, the price will break against the original price movement, and create a reversal trend. The pattern reversal may be signaled during the Flag formation by a pattern of increasing volume, as opposed to the more typical decrease.

Duration of the Pattern

The duration of the pattern depends on the extent of the price fluctuations (consolidation). The greater the fluctuations, the longer a pattern will take to develop.

Target Price

It is commonly held that the length of the flagpole indicates the potential price decrease. When the Flag completes, the price typically jumps to replicate the height of the original flagpole, while continuing in the direction of the inbound trend.

Criteria that Supports

Volume

Volume should diminish noticeably as the pattern forms.

A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume over the course of the pattern should be declining on average.

Criteria that Refutes

Duration of the Pattern

According to Martin Pring, a pattern that exceeds “4 weeks to develop should … be treated with caution”. After 4 weeks, interest in the stock is likely to decrease to point that it is unlikely to continue in a strong downtrend.

No Volume Spike on Breakout

The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable and may actually reverse.

Long Inbound Trend

Shabacker writes that, “When a mast is long … and it’s Flag relatively small, we should naturally expect the movement to be pretty well exhausted when its indicated objective is reached.” He suggests that when you observe this formation, and a price continuation occurs, it is best to use the flagpole as a “yard-stick” to indicate the level at which to “take profits, step aside, and watch for further chart developments.”

Underlying Behavior

This pattern is effectively a pause in a downtrend. The price has gotten ahead of itself with a steep rise; therefore market activity takes a break before continuing the downtrend. This pause is reflected in the decreasing trading volume. Similarly, a spike in volume marks the resumption of the downtrend.

Message for you(Trader/Investor): Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7. Each week you will receive your Course Materials. You can print it and highlight for your Technical Analysis Training.

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

Learning how to profit in the Stock Market requires time and unfortunately mistakes which are called losses. Why not be profitable while you are learning?

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Double Bottom Chart Pattern

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Double Bottom Chart Pattern

Introduction

A double bottom happens when costs form 2 specific lows on a graph. A double bottom is just accomplish, unfortunately, when costs increase above the maximum end of the point that developed the 2nd low.

The double bottom is a reversal pattern of a downward trend in a stock’s cost. The double bottom markings a downtrend in the procedure of getting an uptrend.

Double bottoms are frequently observed and are regarded to be involving the most typical of the patterns. Considering they appear to be so simple to determine, the double bottom should be approached with caution by the trader.

Based on to Schabacker, the double bottom is a “much misunderstood formation.” Many individuals consider that, because the double bottom is such a common pattern, it is constantly dependable. This is not the case. Bulkowski estimates the double bottom has a failure rate of 64%, which he terms amazingly high.If an trader waits for a appropriate breakout, however, the inability level decreases to 3%. The double bottom is a pattern, therefore, that needs close study for ideal identification.

What does a double bottom look like?

As observed under, a double bottom consists of 2 well-defined lows at near the similar amount. Cost decrease to a maintain level, rally and pull back up, then fall to the support level again before enhancing.

double-bottom-chart-pattern

Why is this pattern important?

Corresponding to Murphy, the double bottom is one of the most commonly seen and most easily identified. Still experts concur that this can be a complicated structure to effectively identify. Traders must spend close interest to the amount through the enhancement of the pattern, the amount of increase between the two lows, and the time the pattern takes to develop on the chart.

Murphy describes that bottoming patterns may have compact amount distances than topping patterns and often take longer to build. “For this reason, it is usually easier and less costly to identify and trade bottoms than to catch market tops.”

Is volume important in a double bottom?

Traders should purchase close focus to quantity when studying a double bottom.

Usually, amount in a double bottom is commonly increased on the left bottom than the right. Volume tends to be downward as the pattern forms. Volume does, however, pick up as the pattern hits its lows. Volume increases again when the pattern completes, breaking through the verification point.

Tracking amount is a key feature of identifying perhaps or not a double bottom is legal.

What are the details that I should pay attention to in the double bottom?

1. Downtrend Preceding Double Bottom

As discussed earlier, the double bottom is a reversal development. It commences with costs in a downtrend. Bulkowski cautions that on specific way down, cost should not move under the left low of the structure.

2. Time between Bottoms

Experts spend close focus to the “size” of the structure – the timeframe of the time interval amongst the 2 lows. Commonly, the lengthy the duration amongst the 2 lows, the more significant the pattern as a ideal reversal.  approximately 3 months apart.

3. Increase from First Low

Many experts claim the enhance in cost that happens amongst the 2 soles should be consequential, amounting to near 20% of the amount. Another experts are not so certain or requiring concerning the cost enhance. For some, an enhance of at least 10% is sufficient. Yager definitely agrees with this point. The rise between the lows tends to look spherical but it can also be erratic in structure.

4. Volume

As described previously, amount tends to be heaviest through the 1st low, lighter on the 2nd. It is typical to see amount pick up again at the time of breakout.

5. Decisive Breakout

Corresponding to Murphy, the specialized probabilities generally approval the extension of the introduce trend.This indicates that it is absolutely normal market motion for prices on a downtrend to fall to a maintain stage a number of days, increase back up, and then resume that downtrend. It is a dare for the expert to identify perhaps the increase from the bottom is the indication of the improvement of a legitimate double bottom or basically a short-term problem in the development of a constant

6. Pullback after Breakout

A pullback after the breakout is normal for a double bottom. Bulkowski reports that in 68% of double bottom patterns, amount will throwback to the breakout amount.

How can I trade this pattern?

Get started by estimating the desired cost -of the minimum required price move. The double bottom is calculated in a way similar to that for the head and shoulders bottom.

Estimate the level of the pattern by subtracting the lowest low from the highest high in the enhancement. Then, include the level of the pattern to the highest high. In other words, an investor can expect the cost to move upwards at least the distance from the breakout point plus the height of the pattern.

For example, assume the lowest low of the double bottom is 220 and the highest high is 290. The height of the pattern equals 70 (290 – 220 = 70). The minimum target price is 360 (290 + 70 = 360).

Murphy cautions the terms “double tops and bottoms” are greatly overused in the markets. Most of the patterns referred to as double bottoms are, in fact, something else. Because of this, Murphy advises investors to make their investment decisions only after prices have broken through the confirmation point, completing the reversal pattern.Watching the volume throughout the development of the pattern can help determine whether the pattern is a valid double bottom.

Yager notes that the key for this pattern is for the investor to have patience and wait for confirmation. Too often investors see double bottoms everywhere.

Edwards and Magee explain that patterns where the bottoms are close together in time are likely not valid double bottoms but are, in fact, a consolidation area.

Because so many double bottoms pullback after breaking through the confirmation point, it is often possible to wait for the pullback to place a trade and then watch prices decline for a second time. Bulkowski estimates that the average time for prices to return to the breakout price is 11 days. Throwbacks that occur 30 days after the breakout are not throwbacks at all, but simply normal price fluctuations.

Message for you(Trader/Investor): Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7. Each week you will receive your Course Materials. You can print it and highlight for your Technical Analysis Training.

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

Learning how to profit in the Stock Market requires time and unfortunately mistakes which are called losses. Why not be profitable while you are learning?

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Diamond Bottom Chart Pattern

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Diamond Bottom Chart Pattern

Implication

A Diamond Bottom is considered a bullish indication, indicating a opportunities reversal of the established downtrend to a better uptrend.

Description

Diamond patterns generally form over varied months in very effective markets. Quantity remains high through the enhancement of this pattern.

The Diamond Bottom pattern happens considering costs produce greater levels and less lows in a widening structure. Then the investing range progressively narrows after the heights peak and the lows start trending ascending. The Technical Analysis happens when prices break upward out of the diamond enhancement.

contdiaomnd.pngTrading Considerations

Duration of Pattern

Think about the timeframe of the structure and its connection to your investing time perspectives. The timeframe of the structure is regarded to be an indication of the timeframe of the impact of this pattern. The extended the structure the extended it will consider for the cost to move to its target.

Target Price

The target price produces an significant indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved. intraption

Inbound Trend

The inbound tendency is an significant characteristic of the pattern. A superficial inbound tendency may suggest a stage of combination before the amount move suggested by the pattern begins. Look for an incoming development that is extended than the period of the pattern. A good rule of thumb is that the incoming tendency should be at least two occasions the period of the structure.

Criteria that Supports

Support and Resistance

Maintain can possibly discovered at the switching point of the lows and opposition at the top maximum of the Diamond.

Moving Average

Observe for the 200-day Moving Average to trim out. Subsequently observe for the 50-day Moving Average to corner above the 200-day Moving Average. This should indication the breakout.

Criteria that Refutes

No Volume

A absence of a quantity during the structure is an signal that this structure may not be dependable.

Short Inbound Trend

An incoming tendency that is considerably smaller than the structure timeframe is an indicator that this structure should be regarded less dependable.

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

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Cup with Handle Bullish Chart Pattern

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Cup with Handle Bullish Chart Pattern

Implication

A Continuation Wedge (Bullish) is regarded a bullish indication. It signifies a potential extension of the existing uptrend.

Description

A Continuation Wedge (Bullish) includes of 2 converging tendency lines. The development lines are slanted downward. Unlike the Triangles where the apex is indicated to the appropriate, the pinnacle of this structure is slanted downwards at an perspective. This is considering costs advantage gradually lower in a converging

cup-with-handle-bullish-chart-pattern

Pattern Duration

Give consideration to the timeframe of the structure and its connection to your investing time perspectives. The length of the structure is regarded to be an signal of the period of the impact of this structure. The longer the structure the longer it will take for the cost to move to the goal. The shorter the structure the earlier the cost transfer.

Target Price

The desired cost offers an significant indicator about the prospective cost move that this structure signifies. Give consideration to whether the desired cost for this structure is plenty to supply sufficient comes back after your prices have been utilized into profile. A ideal tip of thumb is that the desired cost must suggest a possible return of enhanced than 5% before a pattern should be considered effective.

Criteria that Supports

Volume

Volume should diminish as the pattern forms.

Criteria that Refutes

Moving Average

The penetration of the 200-day Moving Average by the price is a false bear signal.
Rising or Stable Volume

Volume should diminish as the pattern forms. If volume remains the same or increases this signal is less reliable

Underlying Behavior

In this structure cost edge gradually reduce in a converging structure .

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

Learning how to profit in the Stock Market requires time and unfortunately mistakes which are called losses. Why not be profitable while you are learning?

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Continuation Wedge Chart Pattern (Bullish)

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Continuation Wedge Chart Pattern (Bullish)

Implication

A Continuation Wedge (Bullish) is regarded a bullish indication. It signifies a potential extension of the existing uptrend.

Description

A Continuation Wedge (Bullish) includes of 2 converging tendency lines. The tendency lines are slanted downward. Compared with the Triangles where the apex is indicated to the right, the pinnacle of this structure is slanted downwards at an perspective. This is considering costs edge continuously reduced in a converging structure

Pattern Duration-Target Price-Rising Volume

Trading Considerations

Pattern Duration

Give consideration to the period of the structure and its connection to your investing time perspectives. The timeframe of the structure is regarded to be an indication of the timeframe of the impact of this structure. The extended the pattern the extended it will take for the price to move to the Target. The shorter the structure the earlier the cost move. If you are researching a short-term trading alternative, look for a structure with a short period. If you are researching a longer-term trading opportunity, look for a structure with a extended length.

Target Price

The desired cost produces an significant indicator about the prospective cost move that this structure signifies. Consider whether the focus on cost for this structure is adequate to provide sufficient gains after your costs have been utilized into account.

Criteria that Supports

Volume

Volume should reduce as the structure varieties.

Criteria that Refutes

Moving Average

The entrance of the 200-day Moving Average by the cost is a incorrect bear signal.

Rising or Stable Volume

Volume should reduce as the structure forms. If volume continues to be the equivalent or improves this signal is less dependable.

Underlying Behavior

In this structure costs side gradually reduce in a converging pattern i.e. there are lower highs and lower lows showing that bears are successful over bulls. However, at the breakout point the bulls emerge the victors and the price rises.

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

Learning how to profit in the Stock Market requires time and unfortunately mistakes which are called losses. Why not be profitable while you are learning?

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