Do you recognize a great stock pattern

Do You Recognize A Great Stock Pattern

37 Shares

Stock pattern analysis is something that is usually performed by technical stock traders. However, even ordinary investors can hugely benefit from understanding stock patterns.

Not an Exact Science

Before we delve deeper into stock pattern and their analysis, it is important to understand that it is not an exact science. Many times, even the best technical traders cannot predict the future price movements of the stock based on the chart patterns.

However, understanding stock patterns and recognizing them can definitely give you an edge over the other (regular) investors who do not perform stock pattern analysis. Even if the buy-and-sell decisions may not turn out to be accurate every time, they often prove to be true.

What is a Stock Pattern?

Stock patterns are clear and distinctive patterns that are believed to be capable of signaling the future movements in the price of the stock. The traders make use of these patterns for identifying prevailing trends and for predicting whether the trend would reverse or continue. Typically, in the case of stock patterns, history repeats itself.

Important Reversal and Continuation Patterns

Over a period of time, be it days, weeks, months, or years, there are clear reversal and continuation patterns formed on stock charts. Following are some of the important chart patterns used by technical traders.

Cup and Handle Pattern: This pattern appears like a cup and a handle. This is a bullish continuation pattern. This pattern can be formed within a few months to a year or more.

Rounding Bottom Pattern: Also known as Saucer Bottom, this is a bullish reversal pattern. When this pattern is formed, it implies that the prevailing downtrend of the stock price may be reversed to an uptrend.

Head and Shoulders Pattern: This is a bearish reversal pattern which implies the reversal of a prevailing uptrend to a downtrend.

Inverted Head and Shoulders Pattern: This is a bullish reversal pattern which implies the reversal of a prevailing downtrend to an uptrend.

Flags and Pennants: These are continuation patterns. They are usually formed within a few weeks or months. After the pattern is confirmed, prices move in the same direction as the initial trend.

Double Top Pattern: This is a bearish reversal pattern. It is formed when the resistance level is tested by the price movement two times, without breaking out of it. The price then reverses its uptrend and plunges downward.

Double Bottom Pattern: This is a bullish reversal pattern. It is formed when the support level is tested by the price movement two times, without breaking down from it. The price then reverses its downtrend and surges upwards.

Gaps: Whenever there is a huge price difference between two periods (be it two days, two weeks, or even two months), it forms empty spaces between the two trading periods. This is called as a gap. Whenever a gap is formed, it implies that there is something significant that happened to the stock between the two trading periods. It could be a major earnings announcement, lawsuit, any new product launch, change in company management etc.

In addition to these patterns, there are also patterns like Triple Tops and Triple Bottoms, Triangle Pattern, Wedge Pattern etc.

Some of the important chart patterns are covered in detail in the professional penny stock course, with illustrations and examples for better understanding.

37 Shares

About the Author Victor

Victor help individuals tap into the abundance of lifestyle freedom through Stocks, Options, and Penny Stock Trading. We provide educational training (only) to help increase profits by understanding the Fundamental and Technical Analysis of the Stock Market.

follow me on:

Leave a Comment:

1 comment
Rameena abp says July 25, 2018

Drawing trend lines is one of the few easy techniques that really WORK. Prices respect a trend line, or break through it resulting in a massive move. Drawing good trend lines is the MOST REWARDING skill.

The problem is, as you may have already experienced, too many false breakouts. You see trend lines everywhere, however not all trend lines should be considered. You have to distinguish between STRONG and WEAK trend lines.

One good guideline is that a strong trend line should have AT LEAST THREE touching points. Trend lines with more than four touching points are MONSTER trend lines and you should be always prepared for the massive breakout!

This sophisticated software automatically draws only the strongest trend lines and recognizes the most reliable chart patterns formed by trend lines…

http://www.forextrendy.com?kdhfhs93874

Chart patterns such as “Triangles, Flags and Wedges” are price formations that will provide you with consistent profits.

Before the age of computing power, the professionals used to analyze every single chart to search for chart patterns. This kind of analysis was very time consuming, but it was worth it. Now it’s time to use powerful dedicated computers that will do the job for you:

http://www.forextrendy.com?kdhfhs93874

Reply
Add Your Reply