Key Patterns Of Price ActionKey patterns of price action.
Below I will describe several key patterns, but on the diagrams you can see the analysis from a technical point of view.
And also please pay attention to the rules, which I do not advise to ignore.
The Cup with a handle pattern is formed according to the following logic:
- On an upward movement, the bulls cannot push through the next resistance level, a correction begins. It is undesirable that there were impulses during a rollback, a moderate downward movement should be observed;
-By basic rules, the bottom of the cup should be formed in the area of correction levels. A deeper rollback is allowed in modified models. In case of a deep correction after entering the market, the position is transferred to breakeven as soon as possible, the probability of the trend continuation is lower, it is better to insure;
Double bottom
It all starts with the formation of a new low on a downtrend, after which a rollback against the trend occurs.
Then, the price goes down again and rests against the previous low. And finally, after pushing off from this level, an upward movement begins, which breaks through the level of the previous local maximum. It is after the breakout of this level (confirmation line) that the final formation of the 'Double Bottom' occurs and you can start buying.
The same is with a reversal in an upward market. After the first high, the price should fall by at least 10%. Otherwise, it will mean that the bears are not strong enough.
Saucer
Let's start with the shape of the figure. Contrary to its name, the correct shape of the 'Saucer' figure rather resembles a bowl.
As you can see, the figure is formed by a smooth price movement along a parabolic trajectory. The first half of the figure (the left side of the saucer) is a smooth descent from the edge of the saucer to its bottom. The second half of the figure (the right side of the saucer) is the same smooth rise from the bottom to the edge. Ideally, the second half should be a mirror image of the first. And the bottom should in no case be sharp.
The classic 'Saucer' is formed, as a rule, on large timeframes from D1. But you can also find him on H1.
Flat base
In trading, the term flat means an area on the chart, without a clearly defined direction of price movement, that is, a trend. In other words, flat is the opposite of a trend.
Misc Rules
-all BP = 10 pips
-ideal prior uptrend >30%
-for wks abv avg vol: #up>#down
-up 20% for new base
- undercut base resets base count
- 66% or 3rd stage base fails
- 80% of 4th stage base fails
- in base bottom look for
- shakeout
- tight closes
- volume dryout
- accumulation
