Chart Pattern..

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Support and Resistance Summary...

Whether identifying horizontal support, diagonal support, or a bullish channel, the concept is the same: The stock stops going down near a particular price level. The same holds true for the various forms of resistance. The only difference is that the stock stops moving higher.

The various forms of support and resistance can be used for identifying entry points, determining exit points for profit, and pinpointing exit points from losing trades. Support and resistance levels might even be used as references for stop losses.

No matter how they are used, the concepts of support and resistance are incredibly important to understand. Identifying these levels will become second nature with increasing levels of experience and the observation of more and more charts.

Support and resistance levels can be further organized into formations. These formations are refined even further into different categories of recurring price patterns. Price patterns help to make sense of the price action in stocks. These patterns reveal a clear picture of what the buyers and sellers have been doing. Most importantly, price patterns forecast what buyers and sellers are likely to do in the future.

The building blocks of price patterns are support and resistance levels. These building blocks include horizontal support and resistance, diagonal support and resistance, and bullish and bearish channels. The combination of various types of support and resistance forms the price patterns.

 

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Pengenalan kepada Price Pattern...

Price patterns project the future path of stocks. The patterns do so by observing the past price action of a stock and projecting the collective intentions of buyers and sellers into the future.

Price patterns appear across all actively traded markets such as stocks, bonds, and commodities, and currencies (forex).

The current sentiment of the market and the balance between buyers and sellers is all revealed by price patterns. Sometimes there is no existence of price patterns across stocks. Other times price patterns appear across what seems like all stocks.

Price patterns occur and are applicable in all timeframes, from intraday to yearly timeframes. The beauty of price patterns is that they are recurring. Best of all, there are only a handful of patterns to learn. To further the learning process, there are examples of each of the price patterns below. Seeing more and more charts with price patterns will help to commit the patterns to memory faster.

There are two categories of price patterns: continuation and reversal. There are mirror image patterns in these two categories.

Continuation patterns predict the continuation of an existing trend, either a bullish or bearish trend. It’s important to identify the trend as bullish or bearish when trading continuation patterns.

 

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Introduction to Bullish Continuation Patterns

The bullish continuation patterns and an example of each are listed below.

Bullish Triangle - NYSE Euronext (NYX)

Bullish Wedge - EMC Corp (EMC)

Bullish Flag - Potash (POT)

Bullish Pennant - Activision (ATVI)

Cup and Handle - Arch Coal (ACI)

 

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Introduction to Bearish Continuation Patterns

The bearish continuation patterns and an example of each are listed below.

Bearish Triangle - Starwood Hotels (HOT)

Bearish Wedge - OfficeMax (OMX)

Bearish Flag - Public Storage (PSA)

Bearish Pennant - Merrill Lynch (MER)

Double Distribution - Centex (CTX)

 

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Introduction to Bullish Reversal Patterns

Reversal patterns predict the end of an existing trend and the beginning of a new trend in the opposite direction. It’s equally important to identify the trend as bullish or bearish when trading reversal patterns. Reversal patterns are typically referred to as a top or bottom because they predict the end of bearish trend or bullish trend, respectively.

The bullish reversal patterns and an example of each are listed below.

123 Bottom - Russell 2000 iShares (IWM)

Double Bottom - AT&T (T)

Triple Bottom - Energy Select SPDR (XLE)

Head and Shoulders Bottom - Motorola (MOT)

 

[naztreo]

Good, Chart Pattern ni pun selari ngan EW
mudah nak analisa kemana price nak pegi.


SJ

 

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Introduction to Bearish Reversal Patterns

The bearish reversal patterns and an example of each are listed below.

123 Top - Wachovia (WB)

Double Top - Pfizer (PFE)

Triple Top - American International Group (AIG)

Head and Shoulders Top - Citigroup (C)

Introduction to Price Patterns Summary

In addition to forecasting the direction of a stock, price patterns provide context to your trading. The price patterns offer targets, both in time and price. These objectives are extremely useful in weighing the risk against the potential reward, and for setting time horizons.

Study the appearance of each pattern in this section. The sooner you can identify a particular pattern the sooner it can be applied to actual trading.

 

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Bullish Continuation Patterns

Bullish continuation patterns are the most important price patterns for two reasons. First, individual stocks and the stock market as a whole tend to trend higher. Second, stocks can go 100, 200, or even 10,000 percent higher, but can only go down by 100 percent. The power of exponential growth in stocks is best applied with bullish continuation patterns.

Bullish continuation patterns predict the continuation of existing bullish trends. A prerequisite of bullish continuation patterns, therefore, is a historical bullish trend. Put another way, there needs to be a historical bullish trend before the formation of a bullish continuation pattern. As simple as this may sound, it’s often overlooked by traders new to price patterns.

This goes for trading all price patterns: Always manage risk!

 

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Bullish Triangle

Definition:

A bullish triangle is a symmetrical triangle that forms in the context of a bullish trend. The triangle starts with a big upward move in the stock over a relatively short period of time. This period of time may be weeks for long-term traders or hours for short-term traders.

The stock then proceeds to reverse lower, bounce higher, and continues to do so along converging diagonal support and resistance lines. Both buyers and sellers grow increasingly aggressive in their views, and give the stock less and less room to fluctuate. The converging support and resistance lines meet at the apex of the triangle, at which point the stock generally breaks higher.

Stocks don’t necessarily have to reach the apex of the bullish triangle before breaking. Oftentimes you will see bullish triangles break well in advance of the stock reaching the apex.

Nuance:

The triangle itself is symmetrical and, in fact, neutral in terms of directional bias. It’s only a bullish triangle if it occurs in the context of a bullish trend. It’s very important to independently define the trend of the stock when trading triangles.

Application:

A bullish triangle is confirmed once a stock breaks above the upper-end of the triangle, which is defined by the downward sloping resistance line. A bullish triangle is rejected if the stock breaks down below the lower-end of the triangle, which is defined by the upward sloping support line. A breakdown from a bullish triangle will lead to a period during which a stock trades sideways or starts a new bearish trend and

Example:

The bullish triangle in shares of Google (GOOG) shown in Figure 5.1 is a perfect example of how a bullish trend must be established before the formation of the triangle. Notice how GOOG trended higher from $200 up to $450 before forming the triangle. The triangle formed after the stock had staged a strong bullish trend.

The triangle took ten months to form. The time that the bullish triangle took to form made this particular pattern more of a long-term trade.

Observe how GOOG traded very near the apex of the triangle before finally breaking above the downward sloping resistance line. The stock went on to trade higher over the next 14 months.

 

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Bullish Wedge

Definition:

A bullish wedge starts with a sharp upward move over a short period of time. A bullish wedge forms when a stock reaches and repeatedly retests a horizontal resistance level within the context of a bullish trend.

As the stock pulls back from horizontal resistance, it repeatedly rebounds at increasingly higher support levels. The price action forms a diagonal support level, which eventually converges with the horizontal resistance level.

Nuance:

The bullish wedge is extremely bullish in nature because the buyers are growing increasingly aggressive over time. This aggressive buying usually overcomes the horizontal resistance, which generally forms at psychologically or technically significant price levels. An example of a psychologically significant price level is $100. An example of a technically significant technical price level is a stock’s 52-week high or all-time high.

A bullish wedge can break before the confluence of horizontal resistance and diagonal support. A breakout before the confluence of horizontal resistance and diagonal support is generally a very strong signal that the stock is going to trend higher.

Application:

A bullish wedge is confirmed once stock breaks above the horizontal resistance level. Once broken, the horizontal resistance usually acts as support if the stock pulls back. Repeated and successful retests of previous horizontal resistance are usually a good sign that the stock is going to eventually trend higher. A breakdown below the rising support level rejects the bullish wedge, and generally leads to a short-term bearish trend.

Example:

Shares of Potash (POT) traced a bullish wedge with horizontal resistance at $48 as shown in Figure 5.2. Notice how the stock bumped up against $48 on several separate occasions. Buyers stepped in at increasingly higher levels each time the stock pulled back from horizontal resistance. Eventually, the buyers overcame the sellers and the stock broke above $48.

Observe how the stock broke above $48 well in advance of the apex of the bullish wedge. This revealed increasingly aggressive buying and hinted at the eventual bullish trend that followed the formation of the bullish wedge.

Notice how the stock hesitated and pulled back after initially breakout above the $48 horizontal resistance level. But once it was broken, the $48 horizontal resistance level served as support. After successfully retesting the $48 level for the last time, POT trended steadily higher.