![]() ![]() When prices begin to decline below the lower trend-line, think about a short position and then be prepared to cover when prices approach the target or at the next closest level of price support. Holding out for the downside break is the favorite approach and considerably increases the possibility of a profitable trade. About 1 in 5 will see prices movement horizontally or even break out upward. The low serves as the expected minimum price move.Īgain this formation is a good account for downside breakouts. ![]() The measure rule for this type of formation will differ from most other formations in that it will be based on the lowest daily low, not on the height of the formation. It therefore pays to wait for a confirmed breakout. Also there is a 76% chance that the formation will break out downward. In Thomas Bulkowski’s Encyclopedia Of Chart Patterns, only 6% of the formations breaking out downward will fail to continue moving down by more than 5%. Prices will immediately return to the lower trend-line and normally head lower, breaking towards the downside. In the case of a partial rise going towards the end of the pattern, prices start moving upward, after having found support at the lower trend-line, then stop prior to touching the upper one. The average decline of a confirmed pattern is about 20% If prices do break the lower trend line, the price action may be chaotic and occasionally runs straight through the lower trend-line without even pausing on the way through.
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