Nifty spot analysis BY Santhosh2010
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- Start date
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SWING TRADING DEFINITIONS
Abandoned Baby -- A 3-bar candlestick reversal pattern. A single bar gaps up or down but then
immediately gaps back in the opposite direction on the next bar. The shadow of the lone candle
never crosses the shadow of the bar before the first gap or after the second gap.
Accumulation-Distribution (Acc-Dis) -- The underlying buying or selling pressure within a
particular stock.
Adam and Eve (A&E) -- Top or bottom reversal pattern noted by its sharp, volatile first high (low)
and slower, rounded second high (low).
Ascending Triangle -- A common continuation pattern that forms from a rising lower trendline
and a horizontal top resistance line.
AvgLOSS -- A performance measurement that shows the total losses divided by the number of
losing trades.
AvgWIN -- A performance measurement that shows the total profits divided by the number of
winning trades.
Bear Hug -- A trading strategy that finds short sale opportunities in weak markets that rally into
resistance or narrow range bars on the verge of breakdown.
Bollinger Bands (BB) -- Elastic support and resistance channels above and below price bars
that respond to the tendency of price to draw back to center after strong movement in either
direction. The Bollinger Band center band sets up at the moving average chosen for the indicator.
Breakaway Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the start of a new trend after a prolonged basing period.
Bucket Shops -- Early 20th-century stock gambling parlors that catered to short-term speculation.
Fictional trader Jesse Livermore discusses his experiences in them in the classic Reminiscences
of a Stock Operator.
Charting Landscape -- A three-dimensional view that evaluates complex price action through
multiple layers of information on a single price chart.
Coiled Spring -- A trading strategy that executes a position at the interface between a rangebound
market and a trending market.
Continuation Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the dynamic midpoint of an ongoing trend.
Convergence-Divergence (C-D) -- The tendency of two or more charting landscape features to
confirm or refute an expected price outcome.
Clear Air (CA) -- Pockets of thin participation and ownership that often lead to wide range price
bars.
Climbing the Ladder -- Bollinger Band pattern that indicates a strong and sustained rally.
Cross-Verification (CV) -- The convergence of unrelated directional information at a single price
level.
Cross-Verification x 4 (CVx4) -- A high probability trade in which a single price and time
emerges from analysis through at least four unrelated methods.
Cup and Handle (C&H) -- A popular pattern that triggers a breakout through a triple top. The
formation draws a long and deep base after an intermediate high. The market rallies into a double
top failure that creates the "cup". It pulls back in a small rounded correction that forms the
"handle" and then surges to a new high.
Cup and Two Handles (C&2H) -- A Cup and Handle variation that draws two congestion zones
on the right side of the pattern before price ejects into a strong breakout.
Dark Cloud Cover -- A 2-bar candlestick reversal pattern. The first bar draws a tall rally candle.
The next candle gaps up but closes well within the range of the prior bar.
Descending Triangle -- A common reversal pattern that forms from a descending upper
trendline and a horizontal bottom support line.
Dip Trip -- A trading strategy that buys pullbacks in an active bull market.
Doji -- A 1-bar candlestick reversal pattern in which the open and close are the same (or almost
the same) price and the high-low range is above average for that market.
Double Bottom (DB) -- A common reversal pattern in which price prints a new low, reverses into
a rally and returns once to test it before moving higher.
Double Top (DT) -- A common reversal pattern in which price prints a new high, reverses into a
selloff and returns once to test it before moving lower.
Dow Theory -- Observations on the nature of trend by Charles Dow in the early 20th century. It
also notes that broad market trends verify when the three major market averages all move to a
new high or low.
Electronic Communications Networks (ECNs) -- Computer stock exchanges that rapidly
match, fill and report customer limit orders.
Elliott Wave Theory (EWT) -- A pattern-recognition technique published by Ralph Nelson Elliott
in 1939 that believes all markets move in five distinct waves when traveling in the direction of a
primary trend and three distinct waves when moving in a correction against a primary trend.
Empty Zone (EZ) -- The interface between the end of a quiet range-bound market and the start
of a new dynamic trending market.
Execution Trigger (ET) -- The predetermined point in price, time and risk that a trade entry
should be considered.
Execution Zone (EZ) -- The time and price surrounding an Execution Target that requires
undivided attention in order to decide if a trade entry is appropriate.
Exhaustion Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the end of an active trend with one last burst of enthusiasm or fear.
Fade -- A swing strategy that sells at resistance and buys at support.
Failure Target -- The projected price that a losing trade will be terminated. The price at which a
trade will be proven wrong.
Farley's Accumulation-Distribution Accelerator (ADA) -- A technical indicator that measures
the trend of accumulation-distribution.
Fibonacci (Fibs) -- The mathematical tendency of trends to find support at the 38%, 50% or 62%
retracement of the last dynamic move.
First Rise/First Failure (FR/FF) -- The first 100% retracement of the last dynamic price move
after an extended trending market.
Finger Finder -- A trading strategy that initiates a variety of tactics based upon single bar
candlestick reversals.
5-8-13 -- Intraday Bollinger Bands and moving average settings that align with short-term
Fibonacci cycles. Set the Bollinger Bands to 13-bar and two standard deviations. Set the moving
averages to 5-bar and 8-bar SMAs.
5 Wave Decline -- A classic selloff pattern that exhibits three sharp downtrends and two weak
bear rallies.
Flags -- Small continuation pattern that prints against the direction of the primary trend.
Foot in Floor -- Bollinger Band pattern that indicates short term support and reversal.
Fractals -- Small-scale predictive patterns that repeat themselves at larger and larger intervals on
the price chart.
Gap Echo -- A gap that breaks through the same level as a recent one in the opposite direction.
Hammer -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller
than a high-low range that prints well above average for that market. The real body must sit at
one extreme of the high-low range to form a hammer.
Harami -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller
than the high-low range and sits within the real body of a tall prior bar.
Hard Right Edge -- The location where the next bar will print on the price chart. This also points
to the spot where the swing trader must predict the future.
Head and Shoulders -- This classic reversal pattern forms from an extended high that sits
between two lower highs. Three relative lows beneath the three highs connect at a trendline
known as the neckline. Popular opinion expects a major selloff when the neckline breaks.
Head in Ceiling -- Bollinger Band pattern that indicates short-term resistance and reversal.
Historical Volatility -- The range of price movement over an extended period of time as
compared to current activity.
Hole in the Wall -- A sharp down gap that immediately follows a major rally.
Inside Day -- A price bar that prints a lower high and higher low than the bar that precedes it.
Inverse Head and Shoulders -- This classic reversal pattern forms from an extended low that
sits between two higher lows. Three relative highs above the three lows connect at a trendline
known as the neckline. Popular opinion expects a major rally when the neckline breaks.
January Effect -- The tendency for stocks to recover in January after end-of-year, tax-related
selling has completed.
Market Numbers – Price levels based on multiples or fractions of 10 that act as support or
resistance. Common market numbers include 5, 10, 20, 25, 30, 50, 100.
Moving Average Convergence-Divergence (MACD) -- A trend-following indicator that tracks
two exponentially smoothed moving averages above and below a zero line.
Mesa Top -- A double top reversal pattern that declines at the same angle as the initial rally.
Moving Average Crossover -- The point where a moving average intersects with another
moving average or with price.
Moving Average Rainbows (MARs) -- Wide bands of mathematically related and color-coded
moving averages.
Narrow Range Bar (NR) -- A price bar with a smaller high-low range as compared to the prior
bar's high-low range.
Narrowest Range of the Last 7 Bars (NR7) -- A low volatility time-price convergence that often
precedes a major price expansion. A price bar with a smaller high-low range as compared to the
prior six bars high-low ranges.
NR7-2 -- The 2nd NR7 in a row. A low volatility time-price convergence that often precedes a
major price expansion.
Neckline -- A trendline drawn under the support of a Head and Shoulders pattern over the
resistance of an Inverse Head and Shoulders pattern.
Negative Feedback -- Directionless price action in which bars move back and forth between
well-defined boundaries.
Noise -- Price and volume fluctuations that confuse interpretation of market direction.
On Balance Volume (OBV) -- A volume indicator that measures the progress of accumulationdistribution.
Oscillator -- A subset of technical indicators that accurately measures flat market conditions by
assigning overbought and oversold price levels.
Overbought -- The evolution of price action to a state in which it runs out of buying pressure.
Oversold -- The evolution of price action to a state in which it runs out of selling pressure.
Pattern Analysis -- Price prediction through interpretation of the crowd behavior seen in
repeating chart formations.
Pattern Cycles -- The tendency of markets to repeat identical price formations through different
stages of development in all time frames. The master market blueprint that generates all chart
patterns.
Pennants -- Small continuation pattern that prints against the direction of the primary trend.
%WIN -- A performance measurement that shows the total winners divided by the total number of
trades.
Positive Feedback -- Directional price action in which bars gather momentum and move from
one level to the next.
Power Spike -- A trading strategy that seeks high volume events and executes positions to
capitalize on their special characteristics.
Profit Target -- The projected price that a successful trade will be terminated. The price at which
a trade faces first resistance.
Random Walk -- Classic theory that chaos drives all market activity and that price movement
cannot be predicted.
Rainbow Crosspoint -- A horizontal support and resistance zone created by a moving average
crossover.
Rectangle -- Small continuation pattern that prints sideways to the primary trend.
Reflection -- A 2-4 bar candlestick pattern that first print a significant reversal, then thrusts away
from that formation and immediately draws an identical reversal in the opposite direction.
Relative Strength Index -- A technical indicator that measures a stock's ability to close up rather
than down for a specific period of time. An oscillator invented by J. Welles Wilder that measures
overbought, oversold and divergent market situations.
Rising Wedge -- Reversal pattern that slowly rises in an uptrend until price suddenly ejects into a
selloff.
Seasonality -- The predictable appearance of certain market characteristics that reflect specific
and repeating calendar events.
Setup -- A sequence of bars, patterns or other charting landscape features that predict the
direction and timing of future price movement.
Shooting Star -- A 1-bar to 3-bar candlestick reversal pattern with a small real body and tall
shadow that pushes into an intermediate high or low before a sudden change in direction.
Slippage -- The difference between expected transaction costs and actual transaction costs.
Slippery Slope -- Bollinger Band pattern that indicates a sustained decline.
Signpost - Point on the charting landscape that identifies an imminent trading opportunity.
Silent Alarm -- A rare high volume signal that prints a narrow range bar and flags an impending
breakout.
6-18 Swing -- A moving average crossover system used to track intraday buying and selling
pressure.
Standard Deviation (std dev) -- The positive square root of the expected value of the square of
the difference between a random variable and its mean.
Stochastics -- An overbought-oversold oscillator that compares the current bar to a preset
selection of high and low prices. The indicator plots the results on a graph between 0 and 100.
Support/Resistance (S/R) -- Horizontal and non-horizontal barriers that current price should not
pass without the application of sufficient directional force.
Swing Trading -- A complex execution strategy that relies on identification of market opportunity
through the charting landscape.
Symmetrical Triangle -- A common pattern formed from a descending and rising trendline. The
formation has an equal bias of breaking out in either direction.
Technical analysis -- Market prediction that studies crowd behavior through evolving price and
volume activity.
3rd of a 3rd -- The middle wave and most dynamic price movement within a complete Elliott 5-
Wave rally or decline.
3rd Watch -- A trading strategy that executes a long position on a triple top breakout.
Transit Zone -- The horizontal price level of the last segment of a dying trend that also becomes
the first retracement of the new range.
Trend Mirrors (TM) -- Past chart activity that influences the direction and development of current
trend and range.
Trend Relativity Error -- A common mistake committed when a trader prepares an analysis in
one-time frame but executes in another.
Trendlet -- Small pocket of chart activity that appears and disappears over time.
Trendline -- A line that connects a series of highs or lows. The trendline can represent support in
an uptrend or resistance in a downtrend. Horizontal trendlines mark support-resistance and
range-bound conditions.
Triangles -- A related set of common 3-sided congestion patterns.
Wave -- Sustained price movement in one direction marked by clear high and low reversal
boundaries.
Whipsaw -- Erratic price behavior that triggers false signals and incurs trading losses.
Window Dressing -- Institutional buying or selling near the end of a quarter that makes reported
results appear better than actual results.
Abandoned Baby -- A 3-bar candlestick reversal pattern. A single bar gaps up or down but then
immediately gaps back in the opposite direction on the next bar. The shadow of the lone candle
never crosses the shadow of the bar before the first gap or after the second gap.
Accumulation-Distribution (Acc-Dis) -- The underlying buying or selling pressure within a
particular stock.
Adam and Eve (A&E) -- Top or bottom reversal pattern noted by its sharp, volatile first high (low)
and slower, rounded second high (low).
Ascending Triangle -- A common continuation pattern that forms from a rising lower trendline
and a horizontal top resistance line.
AvgLOSS -- A performance measurement that shows the total losses divided by the number of
losing trades.
AvgWIN -- A performance measurement that shows the total profits divided by the number of
winning trades.
Bear Hug -- A trading strategy that finds short sale opportunities in weak markets that rally into
resistance or narrow range bars on the verge of breakdown.
Bollinger Bands (BB) -- Elastic support and resistance channels above and below price bars
that respond to the tendency of price to draw back to center after strong movement in either
direction. The Bollinger Band center band sets up at the moving average chosen for the indicator.
Breakaway Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the start of a new trend after a prolonged basing period.
Bucket Shops -- Early 20th-century stock gambling parlors that catered to short-term speculation.
Fictional trader Jesse Livermore discusses his experiences in them in the classic Reminiscences
of a Stock Operator.
Charting Landscape -- A three-dimensional view that evaluates complex price action through
multiple layers of information on a single price chart.
Coiled Spring -- A trading strategy that executes a position at the interface between a rangebound
market and a trending market.
Continuation Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the dynamic midpoint of an ongoing trend.
Convergence-Divergence (C-D) -- The tendency of two or more charting landscape features to
confirm or refute an expected price outcome.
Clear Air (CA) -- Pockets of thin participation and ownership that often lead to wide range price
bars.
Climbing the Ladder -- Bollinger Band pattern that indicates a strong and sustained rally.
Cross-Verification (CV) -- The convergence of unrelated directional information at a single price
level.
Cross-Verification x 4 (CVx4) -- A high probability trade in which a single price and time
emerges from analysis through at least four unrelated methods.
Cup and Handle (C&H) -- A popular pattern that triggers a breakout through a triple top. The
formation draws a long and deep base after an intermediate high. The market rallies into a double
top failure that creates the "cup". It pulls back in a small rounded correction that forms the
"handle" and then surges to a new high.
Cup and Two Handles (C&2H) -- A Cup and Handle variation that draws two congestion zones
on the right side of the pattern before price ejects into a strong breakout.
Dark Cloud Cover -- A 2-bar candlestick reversal pattern. The first bar draws a tall rally candle.
The next candle gaps up but closes well within the range of the prior bar.
Descending Triangle -- A common reversal pattern that forms from a descending upper
trendline and a horizontal bottom support line.
Dip Trip -- A trading strategy that buys pullbacks in an active bull market.
Doji -- A 1-bar candlestick reversal pattern in which the open and close are the same (or almost
the same) price and the high-low range is above average for that market.
Double Bottom (DB) -- A common reversal pattern in which price prints a new low, reverses into
a rally and returns once to test it before moving higher.
Double Top (DT) -- A common reversal pattern in which price prints a new high, reverses into a
selloff and returns once to test it before moving lower.
Dow Theory -- Observations on the nature of trend by Charles Dow in the early 20th century. It
also notes that broad market trends verify when the three major market averages all move to a
new high or low.
Electronic Communications Networks (ECNs) -- Computer stock exchanges that rapidly
match, fill and report customer limit orders.
Elliott Wave Theory (EWT) -- A pattern-recognition technique published by Ralph Nelson Elliott
in 1939 that believes all markets move in five distinct waves when traveling in the direction of a
primary trend and three distinct waves when moving in a correction against a primary trend.
Empty Zone (EZ) -- The interface between the end of a quiet range-bound market and the start
of a new dynamic trending market.
Execution Trigger (ET) -- The predetermined point in price, time and risk that a trade entry
should be considered.
Execution Zone (EZ) -- The time and price surrounding an Execution Target that requires
undivided attention in order to decide if a trade entry is appropriate.
Exhaustion Gap -- A classic gap popularized in Technical Analysis of Stock Trends that signals
the end of an active trend with one last burst of enthusiasm or fear.
Fade -- A swing strategy that sells at resistance and buys at support.
Failure Target -- The projected price that a losing trade will be terminated. The price at which a
trade will be proven wrong.
Farley's Accumulation-Distribution Accelerator (ADA) -- A technical indicator that measures
the trend of accumulation-distribution.
Fibonacci (Fibs) -- The mathematical tendency of trends to find support at the 38%, 50% or 62%
retracement of the last dynamic move.
First Rise/First Failure (FR/FF) -- The first 100% retracement of the last dynamic price move
after an extended trending market.
Finger Finder -- A trading strategy that initiates a variety of tactics based upon single bar
candlestick reversals.
5-8-13 -- Intraday Bollinger Bands and moving average settings that align with short-term
Fibonacci cycles. Set the Bollinger Bands to 13-bar and two standard deviations. Set the moving
averages to 5-bar and 8-bar SMAs.
5 Wave Decline -- A classic selloff pattern that exhibits three sharp downtrends and two weak
bear rallies.
Flags -- Small continuation pattern that prints against the direction of the primary trend.
Foot in Floor -- Bollinger Band pattern that indicates short term support and reversal.
Fractals -- Small-scale predictive patterns that repeat themselves at larger and larger intervals on
the price chart.
Gap Echo -- A gap that breaks through the same level as a recent one in the opposite direction.
Hammer -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller
than a high-low range that prints well above average for that market. The real body must sit at
one extreme of the high-low range to form a hammer.
Harami -- A 1-bar candlestick reversal pattern in which the open-close range is much smaller
than the high-low range and sits within the real body of a tall prior bar.
Hard Right Edge -- The location where the next bar will print on the price chart. This also points
to the spot where the swing trader must predict the future.
Head and Shoulders -- This classic reversal pattern forms from an extended high that sits
between two lower highs. Three relative lows beneath the three highs connect at a trendline
known as the neckline. Popular opinion expects a major selloff when the neckline breaks.
Head in Ceiling -- Bollinger Band pattern that indicates short-term resistance and reversal.
Historical Volatility -- The range of price movement over an extended period of time as
compared to current activity.
Hole in the Wall -- A sharp down gap that immediately follows a major rally.
Inside Day -- A price bar that prints a lower high and higher low than the bar that precedes it.
Inverse Head and Shoulders -- This classic reversal pattern forms from an extended low that
sits between two higher lows. Three relative highs above the three lows connect at a trendline
known as the neckline. Popular opinion expects a major rally when the neckline breaks.
January Effect -- The tendency for stocks to recover in January after end-of-year, tax-related
selling has completed.
Market Numbers – Price levels based on multiples or fractions of 10 that act as support or
resistance. Common market numbers include 5, 10, 20, 25, 30, 50, 100.
Moving Average Convergence-Divergence (MACD) -- A trend-following indicator that tracks
two exponentially smoothed moving averages above and below a zero line.
Mesa Top -- A double top reversal pattern that declines at the same angle as the initial rally.
Moving Average Crossover -- The point where a moving average intersects with another
moving average or with price.
Moving Average Rainbows (MARs) -- Wide bands of mathematically related and color-coded
moving averages.
Narrow Range Bar (NR) -- A price bar with a smaller high-low range as compared to the prior
bar's high-low range.
Narrowest Range of the Last 7 Bars (NR7) -- A low volatility time-price convergence that often
precedes a major price expansion. A price bar with a smaller high-low range as compared to the
prior six bars high-low ranges.
NR7-2 -- The 2nd NR7 in a row. A low volatility time-price convergence that often precedes a
major price expansion.
Neckline -- A trendline drawn under the support of a Head and Shoulders pattern over the
resistance of an Inverse Head and Shoulders pattern.
Negative Feedback -- Directionless price action in which bars move back and forth between
well-defined boundaries.
Noise -- Price and volume fluctuations that confuse interpretation of market direction.
On Balance Volume (OBV) -- A volume indicator that measures the progress of accumulationdistribution.
Oscillator -- A subset of technical indicators that accurately measures flat market conditions by
assigning overbought and oversold price levels.
Overbought -- The evolution of price action to a state in which it runs out of buying pressure.
Oversold -- The evolution of price action to a state in which it runs out of selling pressure.
Pattern Analysis -- Price prediction through interpretation of the crowd behavior seen in
repeating chart formations.
Pattern Cycles -- The tendency of markets to repeat identical price formations through different
stages of development in all time frames. The master market blueprint that generates all chart
patterns.
Pennants -- Small continuation pattern that prints against the direction of the primary trend.
%WIN -- A performance measurement that shows the total winners divided by the total number of
trades.
Positive Feedback -- Directional price action in which bars gather momentum and move from
one level to the next.
Power Spike -- A trading strategy that seeks high volume events and executes positions to
capitalize on their special characteristics.
Profit Target -- The projected price that a successful trade will be terminated. The price at which
a trade faces first resistance.
Random Walk -- Classic theory that chaos drives all market activity and that price movement
cannot be predicted.
Rainbow Crosspoint -- A horizontal support and resistance zone created by a moving average
crossover.
Rectangle -- Small continuation pattern that prints sideways to the primary trend.
Reflection -- A 2-4 bar candlestick pattern that first print a significant reversal, then thrusts away
from that formation and immediately draws an identical reversal in the opposite direction.
Relative Strength Index -- A technical indicator that measures a stock's ability to close up rather
than down for a specific period of time. An oscillator invented by J. Welles Wilder that measures
overbought, oversold and divergent market situations.
Rising Wedge -- Reversal pattern that slowly rises in an uptrend until price suddenly ejects into a
selloff.
Seasonality -- The predictable appearance of certain market characteristics that reflect specific
and repeating calendar events.
Setup -- A sequence of bars, patterns or other charting landscape features that predict the
direction and timing of future price movement.
Shooting Star -- A 1-bar to 3-bar candlestick reversal pattern with a small real body and tall
shadow that pushes into an intermediate high or low before a sudden change in direction.
Slippage -- The difference between expected transaction costs and actual transaction costs.
Slippery Slope -- Bollinger Band pattern that indicates a sustained decline.
Signpost - Point on the charting landscape that identifies an imminent trading opportunity.
Silent Alarm -- A rare high volume signal that prints a narrow range bar and flags an impending
breakout.
6-18 Swing -- A moving average crossover system used to track intraday buying and selling
pressure.
Standard Deviation (std dev) -- The positive square root of the expected value of the square of
the difference between a random variable and its mean.
Stochastics -- An overbought-oversold oscillator that compares the current bar to a preset
selection of high and low prices. The indicator plots the results on a graph between 0 and 100.
Support/Resistance (S/R) -- Horizontal and non-horizontal barriers that current price should not
pass without the application of sufficient directional force.
Swing Trading -- A complex execution strategy that relies on identification of market opportunity
through the charting landscape.
Symmetrical Triangle -- A common pattern formed from a descending and rising trendline. The
formation has an equal bias of breaking out in either direction.
Technical analysis -- Market prediction that studies crowd behavior through evolving price and
volume activity.
3rd of a 3rd -- The middle wave and most dynamic price movement within a complete Elliott 5-
Wave rally or decline.
3rd Watch -- A trading strategy that executes a long position on a triple top breakout.
Transit Zone -- The horizontal price level of the last segment of a dying trend that also becomes
the first retracement of the new range.
Trend Mirrors (TM) -- Past chart activity that influences the direction and development of current
trend and range.
Trend Relativity Error -- A common mistake committed when a trader prepares an analysis in
one-time frame but executes in another.
Trendlet -- Small pocket of chart activity that appears and disappears over time.
Trendline -- A line that connects a series of highs or lows. The trendline can represent support in
an uptrend or resistance in a downtrend. Horizontal trendlines mark support-resistance and
range-bound conditions.
Triangles -- A related set of common 3-sided congestion patterns.
Wave -- Sustained price movement in one direction marked by clear high and low reversal
boundaries.
Whipsaw -- Erratic price behavior that triggers false signals and incurs trading losses.
Window Dressing -- Institutional buying or selling near the end of a quarter that makes reported
results appear better than actual results.
1. Upthrust
A large up-bar that – give or take a tick – is a Doji, starting and finishing on the lows. Often referred
to as a Telegraph Pole for obvious reasons, it is a particularly spectacular single-bar reversal when
seen in new territory.
2. Downthrust
Simply the reverse of 1. but somehow it often has a larger tail, when seeking out the stops before
reversing the market.
3. 2-Bar Reversal
Much more common than the first two and very often the big bar reversals tend to head off directly,
which can lead to bad fills or no trade at all. As usual with all patterns, everything depends on where
they are seen and at what time.
4. Picking Up Stragglers
That is the name I gave to this pattern, in that it is really just small retracement which allows you to
get on board, when you had either missed the boat and was left as a straggler on the quayside, or were
just feeling dubious about the signal. I always think of it as the Big Boys taking out the trailing stops
(which they know will be there, in the market!) before getting on with the move, they had decided on.
5. The J-Hook
Another spectacular reversal, often seen deep into new territory and one feels it is designed by the Big
Boys to get all the bulls who have been nervous about accepting their invitation to join the ball, to do
so – before, that is, they announce the last waltz!
6. Reverse J-Hook
Mirror image of the same animal and, while not illustrated, this exceptionally good pattern is seen in
as many instances for reversing south, as north. If you are lucky and the move closes on the res/sup
bar you need for your stop and there is a small entry bar for your trade, you will often get a really
good move following a J-Hook.
7. Tell-Tale Gap
In this instance, seen following the J-Hook, it is that little gap that so often appears as the market is
about to race away. With a fast reversal, you ought to be in the trade and just use the gap as a
confirming tool – or perhaps to add, if in the mood! It is a good signal on the bonds, because they
normally move with such a measured tread, that it is nice to see them look as if they are going to
break into a trot.
8. Classic Double Bottom (DB)
Oft seen in all markets and, once again, it depends very much on where and when it occurs. Cutting a
solid res/sup line is favourite and a slow move away, to allow you to put on the trade. Then it is nice
to see the bar thin out – especially if you get a tell-tale gap. With a move like the one illustrated, you
could be sure you would be getting your Fibonacci tool out pretty shortly…
9. Wedges: Lovely little wedges!
A marvellous indicator of a build up of a move to come. This example shows two flat bottomed
wedges. Easy to have missed the first one, but not the second one. Picking Up Stragglers would have
helped a lot for the second. Again, feasibility and entry would depend on the res/sup situation and
other factors. But the sign of what the market is going to do, is unmistakable.
10. Doji Sandwich (DS)
This is another of my names, because it is such an obvious pattern – both to see and to christen! Study
these five examples[what 5 examples?] and you will see that the top one is the classic: an up-bar
followed by a complete Doji – starting where the up-bar closed and the down bar starting where the
Doji closed. Usually, this pattern is slightly out (and an even have a double doji in the middle), but
whether heralding an up or a down move, it is quite unmistakable. You will see it again and again in
the trading examples following. Once again, it is very much a question of where it is seen and when.
11. Third Time Through (TTT)
This is really a range (often very small) breakout pattern. In this example, the market came down to
settle in a range and it could have done a TTT to the north, but in fact went south. Interestingly, if the
third bar comes up to the line of the range but does not go through, then often a ‘failed’ TTT is as
powerful the other side – but (depending very much on where it is) you can get a very good fill for the
‘other side’ break.
12. Another TTT
This is showing an up break, where it ‘failed’ on the downside and went north and through. After the
failure was the time to get long (depending on where the res/sup was and what your calculation was to
target). To take the trade you have to take an holistic view, but you could see the opportunity brewing
and there would have been the opportunity to do something about it – if the judgment was that it was
worth the candle!
13. Rounded Top (or Bottom)
This is a pattern that will grow on you, because at first you may have some difficulty in actually
spotting the ‘roundness’ and may need to look to the more slow moving 13 or 34 minute charts to see
it properly. While often having a doji or spike high in the centre, it is usually a convincing turning
point in the market. This example shows a follow through tell-tale gap, with a good move ensuing –
but, once again, you could expect to get the Fib retracement tool out pretty shortly.
- Status
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