C h a rt Pat t e r n s in .NET

Drawing QR Code 2d barcode in .NET C h a rt Pat t e r n s

Figure 6-1

In the course of an up move or a down move it is common to see a series of ags as the move develops and matures Figure 6-2 shows a series of bull ags in USDCHF in which the tick volume is much higher on the rallies than on the ags This is textbook chart pattern analysis as higher volume is con rming the up moves and lower volume is con rming the countertrend price action, that is, the ags Note also how the impulse moves, or rallies, are very similar to one another in height and distance This symmetry is common in chart formations

Figure 6-2

In Figure 6-3 we see a bear ag in the stock market in 2007 that played out in the Dow Jones futures contracts The market makes a sharp impulse move down, followed by the ag, and then a second continuation impulse move down We then get a hammer on the downside target (price objective) As quickly as the July price break came, it was over in August, and for all the economic drama the 1,500-point sell-off brought, we were left with a simple symmetrical

Figure 6-3

formation that a student of technical analysis would nd predictable Figure 6-4 shows a series of orderly bear ags followed by a sharp sell-off on August 7, 2008 Note how the tick volume increased on each individual down bar, followed by volume clusters before the price collapse In markets we often see an orderly price move to establish direction, then acceleration on increasing volume, followed by a dramatic sell-off

Figure 6-4

Horizontal Channel The rectangle, or horizontal channel, is essentially a sideways trading range that a market creates while consolidating a previous impulse move It can be thought of as a larger, parallel ag formation The price objective once the channel is broken is the same as the height of the channel, as can be seen in Figure 6-5 Note how we are seeing the same tendencies in price behavior and price objective over and over in each example In our experience technical analysis is less complicated than people seem to want to make it

Figure 6-5

Figure 6-6 shows EURJPY pausing and creating a sideways channel before breaking out in the same direction in which it entered the formation This formation reminds us of the importance of waiting for a close outside the resistance before committing to a trade Triangles A symmetrical triangle is a little more complex than the other continuation patterns The pattern requires at least two lower

Figure 6-6

highs and higher lows within the triangle and usually shows three, and it tends to break out of the formation in the same direction in which it was traveling when it created the base These formations are characteristically larger than ags and take more time to develop As in any breakout, we must wait for the candle to close outside the formation There are two different ways to measure the price objective First, we take the height of the base of the formation; in Figure 6-7 we ve marked a thin gray line to mark the base and extrapolated that distance from the breakout or apex of the formation to get the price objective The other way to determine the objective is to take

Figure 6-7

the support or resistance line from which the price broke away the dominant trendline and copy or extend it from the base Both of these measurements give us the same approximate time and price point in July 2008 We now understand what makes a continuation pattern what it is price will look to continue in the direction it was moving in before pausing in a pattern but we also must always remind ourselves that there are times when markets reverse and what starts out looking like a continuation pattern will turn into a reversal pattern This is why experienced traders always wait for a close above or below the