Get started

#patterns

INDUSIND BANK: Head and Shoulder THEORY: This pattern forms after an extensive upside rally. It consists of a left shoulder, a head, and a right shoulder. The left shoulder is formed after a big bull rally in which the volumes are quite large. At the end of the left shoulder, a minor correction takes place on the downside which happens on the low volumes comparatively the starting of the left shoulder. After this, again an up move can be seen on large volumes forming a head whose top is above the left shoulder following a correction on lower volumes & completing the head. The completion of the head must be below the top of the left shoulder. If the prices fall down below the low of the left shoulder then too this pattern remains intact. In the end, the right shoulder is formed usually on smaller volumes comparatively the previous two rallies. Now if you connect the bottoms of the left shoulder, head & the right shoulder there will be a formation of the ‘Neckline‘. This line will act as a decision line. If the prices break this neckline & give closing below the line, this will be the confirmation of the breakdown of the H&S pattern. However, it has been noticed that after breaking of the neckline the prices again attracted towards this neckline. We say this phenomenon as a retest of the neckline which will add some more confidence while trading this pattern. After retesting if the prices again come down this will be the final confirmation of the downside movement of the price as shown below. The bookish target of this pattern is taken as the vertical price range from the top of the head to the neckline & the bookish Stop loss should be the top of the right shoulder. However this stop loss can be big, so it is advised to keep a stop loss of 4-5% of the price range above the neckline.
NSE:INDUSINDBKShort
by TradingSutra
Flag Pattern (Flag and Pole Pattern)A flag pattern is a trend continuation pattern, appropriately named after it’s visual similarity to a flag on a flagpole. Flag patterns can be bullish or bearish. 1. Flagpole: A line extending up from this break to the high of the flag/pennant forms the flagpole. The flagpole is the distance from the first resistance or support break to the high or low of the flag. The sharp advance (or decline) that forms the flagpole should break a trend line or resistance/support level. 2. Flag: A flag is a small rectangle pattern that slopes against the previous trend. If the previous move was up, then the flag would slope down. If the move was down, then the flag would slope up. The price action just needs to be contained within two parallel trend lines. 3. Break: For a bullish flag, a break above resistance signals that the previous advance has resumed. For a bearish flag, a break below support signals that the previous decline has resumed. 4. Volume: Volume should be heavy during the advance or decline that forms the flagpole. Volume contracts during the flag's formation and expands right after the resistance/support breakout. 5. Target: The length of the flagpole can be applied to the resistance break or support break of the flag to estimate the advance or decline.
Editors' picks
NSE:PRAJINDEducation
by MandeepSinghKohli
25
Cup and Handle PatternA Cup and Handle pattern is a bullish continuation pattern that resembles a teacup on a candle chart followed by a breakout. The cup part of the pattern is where the price gradually changes its direction from bearish to bullish. The handle part is when the price pullback slightly before roars higher and continues the previous trend. Cup and handle is used to understand the reinforcement of the trend and explains in case you want to double your position or sustain the position for a longer time period. This pattern can take between 30 to 60 candles to form on any given time resolution. 1. Cup: The cup should be “U” shaped and resemble a bowl or rounding bottom. Generally, cups with longer and more “U” shaped bottoms, the stronger the signal. The cup should not be too deep. The depth of the cup should retrace 1/3 or less of the previous advance. Volume should dry up on the decline and remain lower than average in the base of the bowl. 2. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. The smaller the retracement, the more bullish the formation and significant the breakout. Sometimes this handle resembles a flag. If the right side of the handle breaks above the peak formed between the cup and the handle, it confirms that the pattern is complete and that the uptrend will resume. There should be a substantial increase in volume on the breakout above the handle's resistance. The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.
HEducation
by MandeepSinghKohli
18
Understanding patterns - PART 1Patterns have been in use for as long as technical analysis have existed and are working today also, traders all over the world try to find patterns in chart to anticipate the possibility of the next move for any Index or stock. Pattern have a reason for working this greatly because all the patterns have an underlying psychology behind it and all these are driven by none other than the human emotions that lie behind them. What are patterns? According to John J Murphy "Price patterns are pictures or formations, which appear on price charts of stocks or commodities, that can be classified into different categories, and have a predictive value." Putting it simply these are formations of candles which take a special shape when seen together and give you an idea of the future possible move of any script. Why do patterns work? Patterns work because they are the depiction of human emotions in the market and clearly shows what the traders in the market want a stock or commodity to do in a particular timeframe, now it must be odd and you may be thinking that how can a simple pattern or movement of the candles can tell you what is going inside the minds of people. Let me give you an idea so that you understand what is it that I mean by reading the minds of the traders using pattern and understanding what they want a particular stock or commodity to do. The chart that you see above is hindalco which is listed on NSE. To understand this let me tell you about the white lines you see, these are called trendlines and are made by connecting highs to highs or lows to lows to get an idea of the trend on current ongoing move or to make a pattern. The pattern you see above is called ascending triangle pattern and is a bullish structure that when gives a breakout the stock or commodity gives a run for the upside. Now the answer to the the question why ascending triangle pattern is bullish and how we get to anticipate the future movement lies in the human emotion or psychology that made this pattern in the market and it will also explain how you understand the human emotion in the market depicted as pattern. This ascending triangle pattern is made by joining two line which I have named as trendline 1/resistance & trendline 2/support. Trendline 1/Resistance shows us that the bears are not willing to let the price go beyond the levels of 470 and are shorting the stock near that price. Bears are wanting the stock to remain below the 470 price level. Trendline2/Support tells us that the bulls are buying the stock on higher prices again and again that's the reason the trendline is inclined, bulls are wanting the stock to go up. Now all of this tells us that right now bulls are more aggressive than the bears as bears are not willing to short below the price of 470 but bulls are ready to buy the stock at higher price and are the reason the price keeps surging up. There comes a time when both the lines meet and there is no buffer space left between buyers and sellers and the price can now only go in single direction now, so bulls being more aggressive breaks the resistance of 470 and the price moves above it. Now there are two things that are going to happen: 1. More buyers will come in to buy as the resistance is broken making the price rally even more. 2.Short positions will have to be covered for, which will yet again make the price move up. So that is how a mere pattern of a triangle joined by two line made you see the emotions of the traders inside the market and thus anticipate the future movement of price. Now this concept applies to all of the patterns there are in the market, some will be as simple as this one while others being more complex but all of these will make you a better trader letting you anticipate the movement. This was the end of Part one of this series in which I'll be trying to make you understand patterns and trade more effectively using them. The Next part will be the two main categories of pattern which will be in more depth and will actually help you anticipate the prices and add these pattern into your trading style. If you have read it far enough so please give it a like and do follow me for the next part which I'll try to drop on the next weekend.
NSE:VOLTASEducation
by this_is_shoaib
📊 Long term view on IBULHSGFIN 📊 NSE:IBULHSGFIN 🔴Price holding at the Demand Zone for a long time. 🔴Right now three consecutive consolidation candles are formed at the demand zone and above the Diagonal support line. 🔴So far price has been responding to all the diagonal support and resistances. 🔴We can buy at the demand zone while consolidation happens or we can wait till break out happens. 🔴If the current demand zone is engulfed, we can see some bearish move till the next demand zone which I have mentioned in the chart. 🔴 DISCLAIMER : This is just for educational purpose. Do your own analysis.🔴
ILong
by PriceAct-fugazitrader
1