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Charts
Formation Course
Ask a Chartist why he lost money and he says I didn't follow my
CHARTS!!, its amazing sometimes when two individuals see the
same charts and one prefers to buy and the other sell, to our
understanding there's only one truth and it can be seen on the
charts.
Charting Course Overview
It is important to note that the Charting Course provided herein
does not attempt to be a comprehensive treatment on Charting or
Technical Analysis methods. There are numerous, well-written
books on Chart Interpretation and Technical Analysis. A brief
and simplistic review of some basic charting concepts are
provided for reference only and to stimulate further study.
TRENDLINES
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Trendlines
- Inclining Trendline
A straight line usually
drawn to define an uptrend against or through price bar
lows.
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Trendlines
- Declining Trendline
A straight line usually
drawn to define a downtrend against or through price bar
highs.
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Support
A horizontal line (floor)
which has acted as a barrier to lower prices. Usually
defined by two or more price bar lows.
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Resistance
A horizontal line
(ceiling) which has acted as a barrier to higher prices.
Usually defined by two or more price bar highs.
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Channel-Inclining
An up-trending price bar
pattern in which inclining parallel lines can be drawn
through or against price bar highs and lows
respectively.
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Channel-Declining
A down-trending price bar
pattern in which declining parallel lines can be drawn
through or against price bar highs and lows
respectively.
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Channel-Horizontal
or Sideways
A horizontal or
"sideways" price bar pattern in which
horizontal parallel lines can be drawn through or
against price bar highs and lows
respectively. Chartists frequently "buy" or
(go-long) on a break up and out of the Channel or
"sell" (go-short) on a break down and out of
the Channel.
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TRIANGLES
Symmetrical
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Triangles-Symmetrical
A price bar pattern in
which the slope of price bar highs and lows are
converging to a point so as to outline the pattern in a
symmetrical triangle. Chartists frequently
"buy" or (go-long) on a break up and out of
the Symmetrical Triangle or "sell" (go-short)
on a break down and out of the Symmetrical Triangle.
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Ascending
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Ascending
Triangle
A price bar pattern in
which the slope of price bar highs and lows are
converging to a point so as to outline the pattern in
Right Triangle. The hypotenuse in an Ascending Triangle
should be sloping from lower to higher and from left to
right. Chartists frequently buy or (go-long) on a break
up and out of the Ascending Triangle or sell (go-short)
on a break down and out of the Ascending Triangle.
However, Ascending Triangles are generally thought to
demonstrate a stronger bias towards predicting a break
up and out of the Triangle, particularly when the trend
leading up to the formation has been up.
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Descending
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Descending
Triangle
A price bar pattern in
which the slope of price bar highs and lows are
converging to a point so as to outline the pattern in
Right Triangle. The hypotenuse in an Descending Triangle
should be sloping from higher to lower and left to
right. Chartists frequently buy or (go-long) on a break
up and out of the Descending Triangle or sell (go-short)
on a break down and out of the Ascending Triangle.
However, Descending Triangle are generally thought to
demonstrate a stronger bias towards predicting a break
down and out of the Triangle, particularly when the
trend leading to the formation has been down.
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Non-Symmetrical
A price bar pattern
in which the slope of price bar highs and lows are converging to
a point so as to outline the pattern in a non-symmetrical
triangle. Chartists frequently "buy" or (go-long) on a
break up and out of the Non-Symmetrical Triangle or
"sell"
(go-short) on a break down and out of the Non-Symmetrical
Triangle.
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| Non-Symmetrical (A) |
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Non-Symmetrical (B) |
PENNANTS
Pennants
Similar to a
Symmetrical Triangle but generally "stubbier" or not
as elongated. A price bar pattern in which the slope of price
bar highs and lows are converging to a point so as to outline
the pattern in a symmetrical triangle. Chartists frequently
"buy" or (go-long) on a break up and out of the
Pennant or "sell" (go-short) on a break down and out
of the Pennant.
WEDGES
& FLAGS
Rising/Inclining
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Wedges-Rising
or Inclining
A price bar pattern in
which the slope of price bar highs and lows are
converging to a point so as to outline the pattern in a
triangle that points diagonally higher. The slope of
both converging lines is up, the lower one being steeper
than the higher one. Chartists frequently buy or
(go-long) on a break up and out of the Wedge or sell
(go-short) on a break down and out of the Wedge. Rising
Wedges, in the context of a prior downtrend are
generally considered to have a stronger bias toward
breaking down and out, as opposed to up and out.
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Falling/Declining
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Wedges-Falling
or Declining
A price bar pattern in
which the slope of price bar highs and lows are
converging to a point so as to outline the pattern in a
triangle that points diagonally lower. The slope of both
converging lines is down, the higher one being steeper
than the lower one. Chartists frequently buy or
(go-long) on a break up and out of the Wedge or sell
(go-short) on a break down and out of the Wedge. Falling
Wedges, in the context of a prior uptrend, are generally
considered to have a stronger bias toward breaking up
and out, as opposed to down and out.
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Bull Flag
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Bull Flag
A price bar pattern
consisting of a relatively small
number of price bars in which the slope of price
bar highs and lows are parallel and declining, or in
which the slopes converge to a point in the shape of a
small Pennant. Bull Flags are identified by their
characteristic pattern and by the context of the prior
trend. In the case of a Bull Flag the trend leading to
the formation of the Bull Flag is up. Chartists
frequently "buy" or (go-long) on a break up
and out of a Bull Flag formation. Bull Flags are
generally considered to have a stronger bias toward
breaking "up and out," as opposed to
"down and out."
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Bear Flag
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Bear Flag
A price bar pattern
consisting of a relatively small
number of price bars in which the slope of price bar
highs and lows are parallel and inclining, or in which
the slopes converge to a point in the shape of a small
Pennant. Bear Flags are identified by their
characteristic pattern and by the context of the prior
trend. In the case of a Bear Flag the trend leading to
the formation of the Bear Flag is down. Chartists
frequently "sell" or (go-short) on a break
down and out of a Bear Flag formation. Bear Flags are
generally considered to have a stronger bias toward
breaking "down and out," as opposed to
"up and out."
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TOP/BOTTOM
FORMATIONS
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| 1-2-3 (A-B-C) Top
Anticipates a change in
trend from up to down on a break below the number
"2" point.
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1-2-3 (A-B-C) Bottom
Anticipates a change in
trend from down to up on a break above the number
"2" point.
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TOP/BOTTOM
FORMATIONS II
Head And
Shoulders
Anticipates a decline on a break below the "Neckline."
Inverted Head and
Shoulders
Anticipates a rise in prices on a break above the
"Neckline."
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Top
Anticipates a change in
trend from up to down.
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Double
Bottom
Anticipates a change in
trend for down to up.
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| Triple Top
Anticipates a change in
trend from up to down.
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Triple Bottom
Anticipates a change in
trend from down to up.
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| Rounded Top
Anticipates a change in
trend from up to down.
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Rounded Bottom
Anticipates a change in
trend from down to up.
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