New Intermed Uptrend!!
- Thread starter Saint
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Hi Avinash,
Long time no see,my friend..........the last I heard of you was after the Karnataka Bk trade.
As of the Punjab Tractors,I agree with you........looking good.Weekly and monthly patterns looking like an inverse h&s.Increased volume last few weeks.Higher pivot lows on the monthly and weekly.
If planning to enter,buy on a weekly close over 210,with a stop loss of 170......but don't expect any immediate blast off moves.Still may take time to develop.
But great find........Nice!!
Happy Trading!!
Saint
Long time no see,my friend..........the last I heard of you was after the Karnataka Bk trade.
As of the Punjab Tractors,I agree with you........looking good.Weekly and monthly patterns looking like an inverse h&s.Increased volume last few weeks.Higher pivot lows on the monthly and weekly.
If planning to enter,buy on a weekly close over 210,with a stop loss of 170......but don't expect any immediate blast off moves.Still may take time to develop.
But great find........Nice!!
Happy Trading!!
Saint
Chart Patterns
Two types:
a)Reversal Patterns:These patterns reverse trends.Eg.Double Top,Double Bottom,Head and Shoulders,Cup n Handle.
b)Continuation patterns:These indicate a possble contination in trends. Eg.Triangles,Bull flag,Bear flag,Pennant
REVERSAL PATTERNS
1.Double Top :This pattern can happen on any time frame.........this halts the uptrend and starts a downtrend in that stock or index.
-Also called as M Top,coz it resembles an "M".
-If double tops are bearish,triple tops are even more so.
-Volume is higher on the first peak,and lesser inthe 2nd peak,and starts picking up on breakdown from the 2nd peak.
-Now take the trough between the two peaks.......breaking that level is confirmation of a change in trend to the downside.
-How does knowing this help us in our trading?
We have a great uptrend on good volume and a pullback on lesser volumes.....so far so good.Now the 2nd peak formation starts to form with much lesser volume as compared to the 1st peak,and then a breakdown on high volume........this gives us an indication to exit our longs if we are short term players as trendlines get broken to the downside.But without confirmation,we are officially in nothing more than a sideways trend with possible fall downwards.Now the trough gets broken and usually the stock retraces back........We are now officially in a downtrend.The time to short has arrived.Short a half at the retracement,and short the other half below the low of the bar that closed below the trough line.Target :The distance between the peak of the "M" to the trough of the "M"......add that to the low of the bar that broke the trough line.That's our target point.
2.Double Bottom:Same as above,it halts a downtrend,and starts an uptrend in that stock or index.
-also called as "W"bottom.
Trading strategy and measuring techniques are just the opposite to the above.
All the best!
Saint
Two types:
a)Reversal Patterns:These patterns reverse trends.Eg.Double Top,Double Bottom,Head and Shoulders,Cup n Handle.
b)Continuation patterns:These indicate a possble contination in trends. Eg.Triangles,Bull flag,Bear flag,Pennant
REVERSAL PATTERNS
1.Double Top :This pattern can happen on any time frame.........this halts the uptrend and starts a downtrend in that stock or index.
-Also called as M Top,coz it resembles an "M".
-If double tops are bearish,triple tops are even more so.
-Volume is higher on the first peak,and lesser inthe 2nd peak,and starts picking up on breakdown from the 2nd peak.
-Now take the trough between the two peaks.......breaking that level is confirmation of a change in trend to the downside.
-How does knowing this help us in our trading?
We have a great uptrend on good volume and a pullback on lesser volumes.....so far so good.Now the 2nd peak formation starts to form with much lesser volume as compared to the 1st peak,and then a breakdown on high volume........this gives us an indication to exit our longs if we are short term players as trendlines get broken to the downside.But without confirmation,we are officially in nothing more than a sideways trend with possible fall downwards.Now the trough gets broken and usually the stock retraces back........We are now officially in a downtrend.The time to short has arrived.Short a half at the retracement,and short the other half below the low of the bar that closed below the trough line.Target :The distance between the peak of the "M" to the trough of the "M"......add that to the low of the bar that broke the trough line.That's our target point.
2.Double Bottom:Same as above,it halts a downtrend,and starts an uptrend in that stock or index.
-also called as "W"bottom.
Trading strategy and measuring techniques are just the opposite to the above.
All the best!
Saint
REVERSAL PATTERNS (CONT.)
3. Head and Shoulders Pattern
-Bearish,reversal pattern signalling the end of the current uptrend.
-Basically looks like the silhouette of a human left shoulder,head and the right shoulder.
Like the Double Top,strong volume push prices upwards forming the "left shoulder".The pullback is on lesser volume,then another strong rally on good volume,forming the "head"......but this time,the volume causing this rally although forming higher prices,is now on relatively lower volume as compared to the vol. in the rally causing the left shoulder.....as the stock pulls back to the neckline,and starts rallying again to form the rt.shoulder,now volume is very noticeably lighter.
-The break of the neckline confirms the H & S pattern(Neckline is the line connecting the two troughs on either side of the head).Volume expansion is noticed as the pattern confirmation takes place.......and the stock or index is now in adown trend.(Reverse happens now......vol. expands on the down fall and decreases on a return move up).
Trading-Wise:ENTRY:The first down day below the neckline confirms the pattern.......short below the low of that bar.If it gives a return move,and not able to break the neckline(now that line has become resistance)....short half on that return move,and the other half below the low of the confirmatory bar.
TARGET:First target would be.......calculate the difference from the head to neckline.Add that to the low of the bar that confirmed the pattern.
STOP:The high of the right shoulder.
One Important Condition:Once the neckline gets broken,expect a return move......but at all costs the price should not re-break the neckline upwards.If this happens,it is called a FAILED H&S PATTERN.Like a failed breakdown,this acts as a bear trap.....and is bullish.So get out if that neckline gets broken back upwards...
4. INVERSE H&S PATTERN
-Reverse of the above.
-reversal pattern that ends a downtrend.
-Tradewise,all reverse of above.
Happy Trading!!
Saint
3. Head and Shoulders Pattern
-Bearish,reversal pattern signalling the end of the current uptrend.
-Basically looks like the silhouette of a human left shoulder,head and the right shoulder.
Like the Double Top,strong volume push prices upwards forming the "left shoulder".The pullback is on lesser volume,then another strong rally on good volume,forming the "head"......but this time,the volume causing this rally although forming higher prices,is now on relatively lower volume as compared to the vol. in the rally causing the left shoulder.....as the stock pulls back to the neckline,and starts rallying again to form the rt.shoulder,now volume is very noticeably lighter.
-The break of the neckline confirms the H & S pattern(Neckline is the line connecting the two troughs on either side of the head).Volume expansion is noticed as the pattern confirmation takes place.......and the stock or index is now in adown trend.(Reverse happens now......vol. expands on the down fall and decreases on a return move up).
Trading-Wise:ENTRY:The first down day below the neckline confirms the pattern.......short below the low of that bar.If it gives a return move,and not able to break the neckline(now that line has become resistance)....short half on that return move,and the other half below the low of the confirmatory bar.
TARGET:First target would be.......calculate the difference from the head to neckline.Add that to the low of the bar that confirmed the pattern.
STOP:The high of the right shoulder.
One Important Condition:Once the neckline gets broken,expect a return move......but at all costs the price should not re-break the neckline upwards.If this happens,it is called a FAILED H&S PATTERN.Like a failed breakdown,this acts as a bear trap.....and is bullish.So get out if that neckline gets broken back upwards...
4. INVERSE H&S PATTERN
-Reverse of the above.
-reversal pattern that ends a downtrend.
-Tradewise,all reverse of above.
Happy Trading!!
Saint
REVERSAL PATTERNS(CONT.)
5.CUP WITH HANDLE FORMATION
-also a reversal pattern,but more obvious at the bottom rather than at the top.
-basically looks like a coffee cup with a handle.
-There is a basing stage,accumulation phase(cup),then a breakout,followed by a pullback,forming what looks like a handle.
-Breaking out of the top of the cup is confirmation of a change in trend.
-Few criteria:The cup should be more rounded than a "V".
The handle should be in the top part of the cup,not too deep.
Cup pattern should take at least 7weeks to form.
Volumes should contract in the handle and expand on b/out.
-From a trade perspective,the buy is at the area where the top of the cup is taken out.Stop:At the low of the handle.Target:Measure the distance to the low of the cup.Add that to the breakout area.
6.REVERSE CUP N HANDLE
-Occurs at the top,rest all reverse of the above.
7.BROADENING FORMATION
-When the trendlines,from left to right,converge.....it's called a triangle.When the trendlines start from a point and diverge as we go from left to right of the chart,that's called a Broadening Formation.
-One more interesting feature:In a triangle,volume decreases within the pattern.In a Broadening Formation,volume expands along with wider price swings.
-This is a BEARISH pattern.
-Due to its divergence,the stock makes a high and a low,then high2 will take out previous pivot high,then prices fall to low2,which takes out the previous pivot low.Then prices move upwards to form high3,which is higher than high2 or high1(not necessary,can even be same height at times).
-Three successive higher peaks,and two declining lower troughs complete this pattern.Confirmation is when the low 2 is taken out as prices start making new lows.
More later!!
Happy Trading!!
Saint
5.CUP WITH HANDLE FORMATION
-also a reversal pattern,but more obvious at the bottom rather than at the top.
-basically looks like a coffee cup with a handle.
-There is a basing stage,accumulation phase(cup),then a breakout,followed by a pullback,forming what looks like a handle.
-Breaking out of the top of the cup is confirmation of a change in trend.
-Few criteria:The cup should be more rounded than a "V".
The handle should be in the top part of the cup,not too deep.
Cup pattern should take at least 7weeks to form.
Volumes should contract in the handle and expand on b/out.
-From a trade perspective,the buy is at the area where the top of the cup is taken out.Stop:At the low of the handle.Target:Measure the distance to the low of the cup.Add that to the breakout area.
6.REVERSE CUP N HANDLE
-Occurs at the top,rest all reverse of the above.
7.BROADENING FORMATION
-When the trendlines,from left to right,converge.....it's called a triangle.When the trendlines start from a point and diverge as we go from left to right of the chart,that's called a Broadening Formation.
-One more interesting feature:In a triangle,volume decreases within the pattern.In a Broadening Formation,volume expands along with wider price swings.
-This is a BEARISH pattern.
-Due to its divergence,the stock makes a high and a low,then high2 will take out previous pivot high,then prices fall to low2,which takes out the previous pivot low.Then prices move upwards to form high3,which is higher than high2 or high1(not necessary,can even be same height at times).
-Three successive higher peaks,and two declining lower troughs complete this pattern.Confirmation is when the low 2 is taken out as prices start making new lows.
More later!!
Happy Trading!!
Saint
REVERSAL PATTERNS(CONT.)
8.RISING WEDGE
-This pattern usually a continuation pattern.
-happens in the middle of a downtrend.
-But when it happens after a strong uptrend,expect it to act as areversal pattern.(In an uptrend,we see falling wedges.In adowntrend,we see rising wedges.......when we get a rising wedge after an uptrend,it's bearish).
-Again,in wedges,volume decreases in the wedge,and increases on breakdown.
9.FALLING WEDGE
-Opposite to the above.
-usually happens in an uptrend.Acts as a continuation pattern.
-when it happens after a downtrend,acts as a reversal pattern.
Either way,Falling wedges are bullish......Rising Wedges are Bearish!
How do we make out if this pattern is a wedge or not?
-Connect the tops,then connect the bottoms.......in a Rising wedge,the top line has to be rising,and the line below would also be rising upwards.In a Falling wedge,the line connecting the peaks will be a downward slanting line.The line connecting the troughs would also be slanting downwards.
Happy Trading!!
Saint
8.RISING WEDGE
-This pattern usually a continuation pattern.
-happens in the middle of a downtrend.
-But when it happens after a strong uptrend,expect it to act as areversal pattern.(In an uptrend,we see falling wedges.In adowntrend,we see rising wedges.......when we get a rising wedge after an uptrend,it's bearish).
-Again,in wedges,volume decreases in the wedge,and increases on breakdown.
9.FALLING WEDGE
-Opposite to the above.
-usually happens in an uptrend.Acts as a continuation pattern.
-when it happens after a downtrend,acts as a reversal pattern.
Either way,Falling wedges are bullish......Rising Wedges are Bearish!
How do we make out if this pattern is a wedge or not?
-Connect the tops,then connect the bottoms.......in a Rising wedge,the top line has to be rising,and the line below would also be rising upwards.In a Falling wedge,the line connecting the peaks will be a downward slanting line.The line connecting the troughs would also be slanting downwards.
Happy Trading!!
Saint
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