6 - Pennant Pattern
pennant pattern is another short-term continuation pattern that marks the mid-point of a longer movement. It is similar to the flag pattern with the consolidation period forming a small triangle rather than a parallelogram or a rectangle. The pennant is the consolidation phase that forms after a rapid, near vertical movement, and is usually characterized by a decrease in volumes. The consolidation period formed by profit taking by traders that entered before the sharp movement, and traders who missed the initial movement and see this phase as a opportunity to enter the trade. The formation of the pennants coincides with a decline in volumes until the break out, which usually occurs within 15-20 periods.
As with other triangles, an entry signal is given when the price breaks out of the pennant in the direction of the preceding sharp movement. The break out is usually accompanied by an increase in volume. If the volume does not increase then the risk of a failure is greater.
The price projection for the pennant pattern is a little complicated. Most traders use the length of the sharp movement that preceded the pennant as the minimum price target. As with all other chart patterns, you should also consider the overall support and resistance levels on the chart to determine levels areas of potential weakness at which to consider taking at least partial profits.
7 - The Cup and Handle Pattern
Handle pattern is a bullish continuation pattern that was first identified by William O'Neil and introduced in his bestselling book, How to Make Money in Stocks: A Winning System in Good Times and Bad, which is currently in its fourth edition. Interestingly, this pattern appears on line, bar and candlestick charts, as well as Point-and-Figure charts. It is a long-term pattern and more suited to longer time-frames, such as the daily and weekly charts. It is rarely seen on shorter, intra-day charts.
The Cup and Handle pattern appears in an uptrend and consists of two parts: the cup and the handle:
The Cup is formed when a series of gentle declines in prices interrupts the uptrend and is followed by an advance to more or less that same level that was reached prior to the decline. This may take the shape of a bowl or a rounding bottom but should not be a V-shape as it should form a consolidation area or a significant support area. Ideally, this decline should retrace about 1/3 of the previous advance and no more than 2/3 of the advance.
The Handle is a trading range or a consolidation area that develops after the Cup is completed. This may be a bullish flag or pennant pattern, or a short pullback. Ideally, the handle should retrace no more than 1/3 into the cup's depth. The shorter the retracement in terms of both time and distance, the more bullish the pattern.
The pattern is completed when the price action breaks the resistance level formed by the peaks that form the rim of the Cup.
The Cup and Handle pattern gives a long entry signal, i.e., a buy, when the price breaks above the resistance formed at the top of the cup. As with any situation where support or resistance is broken, the break out should ideally be accompanied by a significant increase in volume. If the volume does not increase, the probability of a false break out increases. Fortunately, the price should not move into the lower 1/3 of the cup, which makes it a good level to place a protective stop.
The price projection for the cup and handle pattern can be calculated by measuring the depth of the cup, i.e., from the peaks at the top of the cup to the bottom of hte cup. This depth can then be added to the breakout point to find the projected price that should be reached as a minimum price target for this pattern.
*****Support and Resistance
Support and Resistance chart patterns, please see the Rectangle Chart Pattern and the Trendlines Chart Pattern . Support and Resistance is one of the most important and fundamental part of technical analysis:
Support: Prices should rise after touching support.
Resistance: Prices should fall after hitting resistance.
An example of price respecting support and resistance lines is given next in the chart of the Semiconductor HOLDRS (SMH):
support and resistance when stock is trending nowhere
When support and resistance has been firmly established: Buy Signal - Price touches support
Buy when price touches the support line
Sell when price touches the resistance line.
Breaking Support & Resistance
Another fundamental concept of support and resistance is listed next and is shown in the chart below of Alcoa (AA) stock:
If price breaks below support, then that support level becomes the new resistance level.
If price breaks above support, then that resistance level becomes the new support level.
price breaks below support then support level becomes the new resistance level
Support and Resistance are basic yet vitally important technical analysis tools. On every time frame, intra-day, daily, weekly, and monthly, Support and Resistance levels are respected by traders. Knowledge of these levels helps keep a trader on the correct side of the market, thus helping the trader profit.
trying with the practice as appealing entries with the focus of the support confirmation with the presence of the double top figures of the candlestick pattern.
but those gives of too many on fake signals on returns as i guess to leaves those to become parts of other beginner traders of those of whom with the better on chance with the manage of customs with the monitoring and evaluation of market chart profiles.
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Double to and double bottom are good chart patterns for trading and effective and give strong signals and so it is widely used by the traders because it gives good results and decrease the risk and loses, its strength is increased when it is determined and formed on the higher time frames like the daily and weekly time frames and so the trader can follow them on the lower time frames during trading and then he will find that the market moves in the direction he wants and this will help for making of some money, triangles and flags also are good patterns and favorable for many traders and they use it always during analysis of the market and during trading because it makes the chart more clear always.
We must try to understand the chart patterns so that we will know which trading opportunity is present with us.
Originally Posted by Sameeh
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