Pattern
Landscape
When you look at a stock chart, can you find where buyers
or sellers will likely upset the current trend? If not, you’re missing many high
profit opportunities. Past battles between bulls and bears leave a scarred landscape of
unique charting features. When trend finally turns back through old price, skilled traders
use these powerful points to identify effective momentum and swing trades.
Gaps mark the most obvious element of a
pattern landscape. They also provide one of the most profitable setups in all of technical
analysis. Continuation gaps rarely get taken out on the first try, except by another
gap. Successful trade entry in the direction of support can often be executed as
soon as price enters a gap on high volatility. Day traders use this tendency profitably
since major reverse gaps rarely occur intraday. Gaps mark the most obvious element of a
pattern landscape. They also provide one of the most profitable setups in all of technical
analysis. Continuation gaps rarely get taken out on the first try, except by another
gap. Successful trade entry in the direction of support can often be executed as
soon as price enters a gap on high volatility. Day traders use this tendency profitably
since major reverse gaps rarely occur intraday.
Past congestion breakdown identifies short sale entry
points. The more violent the break, the more likely it will resist penetration. Head
and Shoulders, Rectangles and Double Tops leave their
mark with strong resistance levels. These patterns often print multiple doji and hammer
lows prior to a final break as insiders clean out stops at the extremes of the pattern.
Fallen trend that returns to the range of these candles offers low risk entry as price
bounces off resistance.
Clear Air prints a series of wide range bars
as price jumps (or plummets) from one stable level to another. Rapid price movement tends
to repeat each time that a trend enters its boundaries. Potential reward spikes sharply
through these unique zones. But watch out. Sudden reversals tend to be sharp and vertical
as well. Tight stops are advised. Clear Air prints a series of wide range bars
as price jumps (or plummets) from one stable level to another. Rapid price movement tends
to repeat each time that a trend enters its boundaries. Potential reward spikes sharply
through these unique zones. But watch out. Sudden reversals tend to be sharp and vertical
as well. Tight stops are advised. Clear Air prints a series of wide range bars
as price jumps (or plummets) from one stable level to another. Rapid price movement tends
to repeat each time that a trend enters its boundaries. Potential reward spikes sharply
through these unique zones. But watch out. Sudden reversals tend to be sharp and vertical
as well. Tight stops are advised.
A complex landscape develops as price breaks into ranges
where past multiple swings took place. Once new support is established, the odds favor
more of the same. A Swing Range may exist for an extended period of time.
The more durable a range was in the past, the longer this new swing range should persist
before price finally surges into a new trend impulse. But be aware that other landscape
features may suggest an earlier breakout from these profitable zones.
Pattern landscapes recognize that important features may
not be horizontal. What the eye resolves as uptrend or downtrend contains multiple
impulses shooting out in many directions. While these forces converge into visible trend,
individual "trendlets" can often be traded. The most common of these is the Parallel
Price Channel.
Past price action exerts a powerful influence on current
movement. But trend development is a complex process, combining many divergent forces. It
would be simplistic to assume that each impulse will stop right at the tick where it did
last week or a year ago. Regardless, the skilled trader can often predict the influence of
key past events on current price and execute profitable strategies using only the features
of the landscape.
