Advanced Price Action Patterns
Stock prices may remain flat for a period of time, and the
shape of the stock price transition (chart pattern) during this period may
imply an uptrend or a downtrend thereafter.
In this case, the chart pattern can be roughly divided into
those showing the trend reversal and those showing the trend continuation.
Let's take a closer look at each pattern!
Trend reversal (1) -TOP hit pattern-
As a pattern that shows a trend reversal pattern hit the Top
and a pattern that hit the bottom there is, but first I will introduce three
patterns that hit the Top.
Head and shoulders (head and shoulders)
When a chart is formed with three highs (ceiling) and pushed back to the seller all three times, the middle (high (2)) is the "head", left and right (high (1), high (3)). ) Is regarded as a "shoulder" and is called a "head and shoulder" . In Japan, it is also called "head and shoulders " , which is similar to the statue of Shaka Sanson .
The most famous ceiling formation pattern. It means a shift to a downtrend over the medium to long term .
In this pattern, of the three peaks (high / ceiling), the first
and third peaks tend to be about the same value, and the left and right pushes
(low prices) across the second peak are also about the same . increase.
Also, pay attention to the volume at this time . Volume will drop significantly on the third mountain .
The important point to keep in mind here is the neckline .
The line drawn horizontally from the squeeze (low price) is called the
neckline. When the stock price breaks the neckline, it is recognized that the
uptrend is over .
Let's check the chart!
Below the neckline, it becomes a selling point, but even
before the pattern is fully formed, it can be read that there is a change in
the upward phase from the volume to that point.
Did you remember anything when you saw "Head and
Shoulder" ?
that's right! It is " Miyama of Sakata Goho"
explained in the first "Candlestick " . It was a typical pattern of
ceiling formation, as you can see when the market is going down .
If this shape appears in the high price range, there is a
high probability that it will be a strong sell signal , so be careful!
Double top
When a chart is formed in which the stock price falls after attaching the peak (high price) twice , the two peaks (high price) and the valley (low price) formed between them are called "double top" . In this pattern, the two peaks (highs) have about the same stock price.
Imagine the psychological state of the investor at this
time.
There are stocks that I want to buy! However, there is no chance to buy at all, and while just watching over the stocks that continue to rise, when the stock price finally hits the ceiling and makes a squeeze, it is an investment that makes you want to buy for the next high price. Isn't it home psychology? !!
So, in fact, after a stock price hits a high price and goes
down, it often goes up again with a bargain purchase.
However, when it comes to the vicinity of the previous high
price, many investors think that "it is unlikely to rise anymore ..."
and "it will fall again if it is not sold now ...". , The stock price
starts to fall at almost the same place as the previous high price, and as a
result, a "double top" is formed.
I think you can realize that "human psychology makes charts".
Here again, the neckline (the line drawn horizontally from
the squeeze) is here!
When stock prices break below the neckline after a
"double top" is formed, they often turn down .
(Advanced Price Action Patterns)
The method of determining the selling point is the same as
for "Head and Shoulder".
Be aware that below the neckline, you'll be a selling point
!
Saucer top
It is called the "saucer top" because it forms a
chart that looks like the saucer placed under the cup is turned over while the
period in the high price range is relatively long and small ups and downs are
repeated. I am.
Even in this pattern , the selling point is where the stock
price falls below the neckline .
Trend reversal (2) -Pattern that hits the bottom-
Next, I will introduce three patterns that hit the bottom.
Reverse head and shoulders (reverse head and shoulders)
As you can guess, the reverse pattern of "head and
shoulder" is "reverse head and shoulder" .
This pattern forms three valleys with the deepest center .
The line connecting the return highs (1) and (2) becomes the
neckline, and by exceeding this neckline, the pattern is completed.
Also, the point above this neckline is the buying point .
The most famous bottom price formation pattern. It means a shift to an uptrend over the medium to long term .
In this case as well , pay attention to the volume !
Breaking above the neckline in this way involves a large amount of volume.
The key to understanding the chart pattern is "volume"!
Double bottom
Again, the reverse pattern of "double top" is
"double bottom" .
In this pattern, the two valleys (lows) have about the same stock price . It will stop declining at the same level as the first valley, but the volume will be less than the first .
In this pattern, when the price falls toward the first
valley (low price (1)), the sell calls the sell and the volume is high.
And in the second valley (low price (2)), if the stock price rebounds at a stock price close to the first valley (low price (1)), a sense of security is created that "it will not be lowered any more!" Unlike the market price of, it begins to convert to a bull market.
By crossing the neckline, the trading volume will increase further, and it will be a full-scale shift to the uptrend by escaping the bottom price range
Saucer bottom
Again, the reverse pattern of "saucer top" is "saucer bottom" .
It is called a "saucer bottom" because it forms a
saucer-like chart that sits under the cup while it is in the bottom zone for a
relatively long period of time and repeats small ups and downs .
Volume tends to increase when it reaches the bottom .
Even with this pattern, the point above the neckline is the
buying point . However, it is difficult to find a buying point because the
movement is gentle.
Look for changes in volume and find buying points.
Since the movement is gentle, there is also the advantage
that you can make a buying and selling decision without rushing !
Think carefully and plan your future strategy.
It appeared in "Extremely changing the trend"
explained in the 2nd "How to identify the trend" , but the trend
continues (maintaining the middle stage) although the flow of the uptrend and
the downtrend stops once. Sometimes it does.
Even in that case, there are some patterns, so I will explain
the typical patterns.
There is a pattern in which the upper and lower trend lines
gradually narrow and converge into a triangle.
And after convergence, it often moves significantly up or
down.
Triangular retention
Rise (upward triangle holding)
Fall (downward triangle holding)
The width of the line connecting the high price and the high
price (upper price resistance line) and the line connecting the low price and
the low price (lower price support line) gradually narrows, and the triangle
surrounded by this line where the stock price changes is called " It is
called "triangular consolidation" .
When the stock price changes in the triangle, the volume
decreases, and when it crosses either the upper or lower line, the volume
increases .
The point of buying and selling is when it breaks through the upside resistance line or the downside support line .
This chart is often seen after stock prices have risen or
fallen sharply.
If the upward triangle is held, the probability of rising
(rising) is high, and
if the downward triangle is held, the probability of falling (falling) is high.
Pennant type
The "pennant type" is the one in which the range
of price increase / decrease becomes smaller within the range of the
upward-sloping upper resistance line and the upward-sloping lower support line
.
When this chart pattern appears , you need to be careful
when you come near the tip .
Since energy is stored in the tip part, there is a high possibility that it will suddenly rise or fall after that.
The price range (the length of the part "A" that looks like the handle of a flag) from the level at which the surge or plunge began to the level at which the "pennant type" was formed is higher than the "pennant type" (consolidated state). Or, it is said that the price range from the lower level will move by the same amount, so let's use this price range as a guide!
The pennant type is said to be more likely to appear immediately after a sharp rise or fall in price .
A pattern in which the upper and lower trend lines advance
in a nearly parallel manner
Box type
The state of repeating rising and falling within the range
of the parallel upper resistance line and lower support line is called
"box type" .
Volume decreases over time, but when the stock price breaks
through either the upside resistance line or the downside support line for some
reason (news, etc.), the volume increases sharply .
It also tends to be more likely to continue the trend before entering this pattern after breaking through .
The timing of investment is when the upper resistance line
breaks out with the volume, but even when forming a box type, making good use
of that habit, "prepare at the lower price and sell at the upper
price" is repeated to make a profit. Can be stacked!
Flag type
The shape in which the stock price continues to consolidate
between the upside resistance line and the downside support line and the box
type is slanted is called the "flag type" .
It is called a "flag type" because the shape of
the chart resembles the flag used for racing, considering the sudden rise or
fall just before as a pole.
When this flag type consolidating in the middle of the rise,
it tends to rise again after that, and when it becomes this flag type
consolidating in the middle of the fall, it tends to fall again after that.
