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Chart Patterns

How to identify Breakout - Price ActionFor the purpose of demonstrating how one can identify a trend change using Support - Resistance and Price Action, I have taken the daily chart of IEX. I had also identified and posted about it before the recent rally. The first step is to establish a clear support and resistance line. In case of a breakout, I like to keep my target at around the same price difference range between old support and old resistance after it bounces from the resistance. The crucial thing lies in identifying the candlestick pattern around the support - resistance. In our case, when the price first hit the resistance, it formed a clear Bearish Engulfing and the next time, it formed a healthy dark cloud cover followed by an engulfing. These are clear red flags when a trader should start booking profits. Similair bullish patterns can be identified at support region like the Morning Star pattern as in the above chart. In order for the price to give a breakout, Volume & Momentum play a very crucial role. A rising volume with price rise builds momentum, and increases the chances of a breakout. Another important observation is to see HOW STRONG did the PRICE BOUNCE from the support. Long wicks, very less or almost no consolidation around the support and a bounce back from an area above the support instead of retracing all the way back to the support are clear indications of trend reversal from Bearish to Bullish. Also notice how the candle formed a Morning Star during the bounce, this further strengthens our conviction that the trend is changing. Observe how the red candles grow smaller and smaller as they approach support, this indicates weakening of the bearish momentum. Also the Resistance was approached in a very aggressive foray this time with clear long green candles indicating a very strong pent up demand. I hope this analysis provides some insight into how the Price action gives an early indication of the future price movement. Thanks for reading! Keep Learning :)
NSE:IEXEducation
by Aayush_Rungta
36
Indicator Free Trading of Cup and Handle Pattern - A Case StudyThe above chart is the daily chart of Bharat Electronics . Here we can observe that the stock has formed a Cup and Handle Pattern. Now I shall elaborate in detail on how to trade the Cup and Handle Pattern with appropriate Trading strategy and Psychology. In the above chart, we can observe a stiff resistance at 160 levels for the stock. Hence it needs to be hit multiple times to make it weak and finally give a breakout. In case of a Cup and Handle Pattern, the resistance is hit a minimum of 3 times, before giving a breakout. In this case, we observe an ideal scenario which may not be the case always. How to Trade Cup and Handle Pattern? Trading Strategems: When to enter? There can be 2 fundamental ways to trade the stock. 1. Take Entry as as soon as stock breaks out of the pattern (Entry 1) i.e. at 161-163. Generally an experienced trader or a trader with good risk appetite takes entry here. Trading Tip - Even if you have good risk appetite, do not take trade as soon as the breakout occurs. Wait for a daily green candle to close above the breakout levels and enter the next day when the previous breakout candles's high is taken out. 2. Wait for Retest of previous resistance and then take an entry (Entry 2) i.e. at 173. Generally a beginner or a safe trader takes entry here. Trading Tip - Wait for a green bullish candle (ideally a bullish green hammer candle with a good tail) to form at the retest levels. Take entry on the next day, only when the previous bullish green hammer's candle's high is taken out. Where should be the Stop Loss? In every trade, we should give utmost and primary importance to Stop Loss rather than target. Only after calculating our Stop Loss, we can assess our Risk and accordingly plan the Reward or Profit. In this case, there can be 2 different SL levels for above 2 strategies: 1. For Entry 1, the stop loss should be a little below the handle i.e. 140. 2. For Entry 2, our stop loss becomes a bit less i.e at 160 Trading Tip - Do not give SL at exact levels from where the stock has bounced back. For example - In entry 1, it is better to give SL at 138 rather than 140 so that minor fluctuations do not hit our SL and then move upward. Similarly in entry 2, it is better to give Sl at 160 rather than 162. What should be the Target? In general, the target is calculated by calculating the depth of the cup. In this case, the depth of the cup ranges from Rs 120 - 160 i.e. Rs 40. Hence the stock will move up by Rs 40 from breakout ( or retest levels) i.e. from Rs 160 - 200. Hence our ideal target should be Rs 200 Trading Tip - In the present times, all traders use digital charts. Hence the whole world can see that a Cup and Handle Pattern has formed. Every trader knows the ideal target is Rs 200. Thus all FIIs, DIIs, automated trading systems, retail traders, etc. would have put huge sell orders at 200 levels. Hence the stock may fall sharply as soon as it touches Rs 200 due to heavy selling or heavy supply. Thus it is better to book profits at just below the target i.e. between Rs 195-198 so that you may not lose money. Thank you. Please like and share the idea if you learnt something..Cheer me up!
NSE:BELEducation
by tksthathachari
4
Low Risk High Reward Setup with RSI BULLISH DIVERGENCEThe analysis is on how to create a low risk high reward trade with RSI being a key indicator,together with previous broken resistance line now acting as a support. If the price slope of the stock is negative (bearish) and the RSI slope is positive (bullish) it is an indication (RSI BULLISH DIVERGENCE) of the reversal in the price of the stock.With the previous broken resistance line which will be the demand zone of the buyers a long setup can be created with the stoploss just below the confirmation bullish candle at the close of the day. My name is Ragav follow me for more educational as well as strategical ideas.
NSE:ASALCBREducation
by Ragav27
How multiple confirmation can lead to a high probability setup!The stock has been trading in the range for past 200+ days and has started to show the signs of strength and these are: 1. A quick bounce from the support taking out the short term resistance of 1070. 2. Volumes have stated to increase showing the bullish sentiment among buyers. 3. The gap between 21-day and 50-day EMA has been reducing. Why this time the breakout can be successful? 1. Resistance has become week as being tested multiple times. 2. A rapid recovery from the lows that too with large volumes. 3. By the time the stock reaches resistance EMA may complete the crossover which further adds odds in our favour. Possible Scenerios during a breakout: Scenerio No. 1. Break and retest: Here, in this scenerio stock does not wait near the resistance rather quickly takes out the resistance and comes back for the retest and when it breaks the High of the BO or alert candle a buy SL-M shall be waiting for your entry into the stock and SL shall be placed just below the recent low the stock has established. Scenerio No. 2. Halt near the resistance: In this case the stock may conslidate near the resistance for a few days in a very tight range, which is a typical case of high reward low risk strategy. Here entry can be made as soon as the stock crosses the narrow consolidation near the resistance and the SL just under the same narrow range shall be placed.
NSE:VOLTASEducation
by abhinavjain97
49
#1 RSI(Relative Strength Index)100%Work# WE WILL MAKE ONLY PROFIT #The relative strength index (RSI) is a popular momentum oscillator developed in 1978. The RSI provides technical traders with signals about bullish and bearish price momentum, and it is often plotted beneath the graph of an asset's price. #What Does the RSI Tell You? The primary trend of the stock or asset is an important tool in making sure the indicator’s readings are properly understood. For example, well-known market technician Constance Brown, CMT, has promoted the idea that an oversold reading on the RSI in an uptrend is likely much higher than 30% and that an overbought reading on the RSI during a downtrend is much lower than the 70% level.1 As you can see in the following chart, during a downtrend, the RSI would peak near the 50% level rather than 70%, which could be used by investors to more reliably signal bearish conditions. Many investors will apply a horizontal trendline between 30% and 70% levels when a strong trend is in place to better identify extremes. Modifying overbought or oversold levels when the price of a stock or asset is in a long-term horizontal channel is usually unnecessary. A related concept to using overbought or oversold levels appropriate to the trend is to focus on trade signals and techniques that conform to the trend. In other words, using bullish signals when the price is in a bullish trend and bearish signals when a stock is in a bearish trend will help to avoid the many false alarms that the RSI can generate. #Example of RSI Swing Rejections Another trading technique examines the RSI’s behavior when it is reemerging from overbought or oversold territory. This signal is called a bullish “swing rejection” and has four parts: 1. The RSI falls into oversold territory. 2. The RSI crosses back above 30%. 3. The RSI forms another dip without crossing back into oversold territory. 4. The RSI then breaks its most recent high. As you can see in the following chart, the RSI indicator was oversold, broke up through 30% and formed the rejection low that triggered the signal when it bounced higher. Using the RSI in this way is very similar to drawing trend lines on a price chart. IF YOU NEED ANY HELP JUST COMMENT OR MESSAGE M😊😊
NSE:BANKNIFTYEducation
by UnknownUnicorn22712522
37
WHAT IS A CHANNEL PATTERN ?CHANNEL PATTERN :- It is nothing but a formation of two almost parallel lines between which the stock oscillates. Channel can be of 3 types : 1) Horizontal Channel 2) Rising Channel 3) Falling Channel It is a constant fight between bears and the bulls and victory is decided by the breakout or breakdown of the channel pattern. Bulls wins the fight if breakout occurs , bears wins the fight if breakdown occurs. When fight is over, the stop loss of other team is hit hence we can see a very strong move after the breakout or a breakdown. I have explained everything on the chart itself but here is one tricky point which i would like to again repeat. :- When a stock fails to touch the either of the line , there is a possible chance of breakout on the opposite side. ( as clearly seen in the chart breakout took place on above side when stock didn't touched the support line ) In above scenario bulls were more strong as they didn't let the stock move towards the support line, bears lose hope and finally breakout took place. Another secret point i would like to share with you all :- When stock gives a fakeout (breakout + moving back into the channel ) there is a possible chance of breakdown on the opposite side. and When stock gives a fakedown (breakdown + moving back into the channel ) there is a possible chance of breakout on the opposite side. I have shared many channel pattern stocks in my previous analysis , feel free to watch them for better understanding.
NSE:INDIGOEducation
by headymuk
59
SUDARSHAN CHEMICAL.... LET'S LEARN...Friends. I thought let's learn this kind of candle pattern seen in Sudarshan chemicals. Based on my observations as well as from the teachings of few technical experts, the following pattern is described. 'When an unusually long green candle is formed followed by a red candle on top of the green candle, reversing the direction, this eventually ends in further red candles forming almost getting the stock price back to the start of the long green candle'. We can see large volumes traded on the first day, but on the next day, the sellers seem to dominate. This pattern is neither a dark cloud cover nor a bearish harami... But it is also a bearish reversal indicator. If anyone has an idea about this pattern, please share it for all of us to learn. Though better in higher time frames, this pattern works well even in smaller time frame charts. Again, this is not a sure-shot signal for going short with Sudarshan chemicals. Let us watch, observe, and study how this pattern works. This pattern will fail if a green candle forms tomorrow.
NSE:SUDARSCHEMEducation
by Stock-Holmes
Identifying Set Ups - Price Action + MACD + EMAToggling between numerous stocks can be tiresome. Using a strategic method to identify potential set ups can save your time and deliver amazing results! In the above chart, I first noticed that the price was around its support. It can be confirmed by seeing the previous price swings that the support is well tested. Next I look at the MACD to confirm if the divergence between the Signal Line and MACD line is decreasing to make sure if it is the right time to enter or not. Usually these 2 steps take hardly a few seconds and I can form a preliminary idea about the position. Once these two points are confirmed, I move forward to confirm if the EMA 9,21 (which can been seen has worked out beautifully for this stock in the short time frames like 7-10 days) is actually looking bullish to enter right now. If the EMA is not already crossed, or about to cross, I can drop the share here. In this case, the EMA lines are very close and the chances of a bullish cross are good enough. Next, I confirm my hunch by looking at the Volume data and see if the increase is price will actually be sustained by smart money flow, or fall down by retail trading pressures. Increasing volume with price increase helps to get conviction for a long position. Finally, I check the RSI levels and I monitor them very closely to see if there is any Bullish or Hiden divergence and see how strong they might be. I also like to draw a vertical line at the key level from which RSI always bounces or retracts. Personally I prefer RSI levels between 50 and 60, after a recovery from 30-40. It just implies that the bulls are gaining control again and still leaves out plenty of room for entering a trade and making profits before it hits the overbought region. After I am satisfied with the Technicals, the last thing remains is to check if there are any major news, events or rumours about the share and the recent EPS growth of the share. This doesnt affect a lot in the short run, but doing due diligence never hurts. It is how I identified IEX, HUL and TCS just right before they shot up. Thanks for reading! Keep Learning :)
NSE:CYIENTEducation
by Aayush_Rungta
28