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INDICATORS AND OSCILLATORS

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  INDICATORS AND OSCILLATORS   A Technical indicator is a mathematical formula applied to the security’s price, volume or open interest. The result is a value that is used to anticipate future changes in prices. A technical indicator is a series of data points derived by applying a formula to the price data of a security. Price data includes any combination of the open, high, low or close over a period of time. Some indicators may use only the closing prices, while others incorporate volume  and open interest into their formulas. The price data is entered into the formula and a data point is produced. uses of indicators   Technical Indicators broadly serve three functions: to alert, to confirm and to predict. Indicator acts as an alert to study price action, sometimes it also gives a signal to watch for a break of support. A large positive divergence can act as an alert to watch for a resistance breakout. Indicators can be used to confirm other technic

THE ISLAND REVERSAL

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THE ISLAND REVERSAL   The performance of island reversals is perhaps surprising only for its mediocrity. Failure rates for both tops and bottoms are reasonable, holding below the 20% threshold that I view as the maximum allowable for reliable formations. The average decline from an island top ranges between 17% and 23%, depending on market conditions. The range is similar to many other bearish chart patterns. However, the average rise from an island bottom is a disappointing 21% to 23%, and that is well below the 35% to 40% I like to see for bullish chart patterns. With these mediocre performers, trading every island that you see is a way to drown in losses. You can improve performance by selecting patterns with the proper height and width characteristics for the market you are trading, as described later in this chapter. Pullbacks and throwbacks are prevalent, suggesting that the gap after the island completes closes quickly. Investors can make use of this behavior to

FLAG AND PENNANT PATTERN

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FLAG AND PENNANT PATTERN The flag and pennant patterns are commonly found patterns in the price charts of financially traded assets stocks, bonds, futures, etc. The patterns are characterized by a clear direction of the price trend, followed by a consolidation and range bound movement, which is then followed by a resumption of the trend.The continuation patterns which we have taken up so far in this Study  the various types of Triangles and the Rectangle have one    FLAG  PATTERN     The flag pattern is encompassed by two parallel lines. These lines can be either flat or pointed in the opposite direction of the primary market trend. The pole is then formed by a line which represents the primary trend in the market. The pattern is seen as the market potentially just taking a “breather” after a big move before continuing its primary trend. The chart below illustrates.Thus, the first requirement of the Flag formation is a nearly vertical price movement on th

TRIANGLE CHART PATTERN

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TRIANGLE CHART PATTERN Triangles are a commonly found in the price charts of financially traded assets stocks, bonds, futures, etc. The pattern derives its name from the fact that it is characterized by a contraction in price range and converging trend lines, thus giving it a triangular shape. ascending and descending triangle chart pattern are horizontal trend line drawn across the minor highs and an up-sloping trend line connecting the minor lows form the characteristic triangular pattern. Volume diminishes as   prices bounce between resistance at the top and support at the bottom. A premature breakout gives a hint of the coming action; less than two weeks later, prices break out again and move higher.  ASCENDING TRIANGLE                                                                  The ascending triangle is formed when the market makes higher lows and the same level highs. These patterns are normally seen in an uptrend and viewed as a continuation patt

FALLING AND RISING WEDGE

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FALLING AND RISING WEDGE   WWW.FURTHERGROW.IN   The wedge pattern is a commonly found pattern in the price charts of financially traded assets  like stocks, bonds, futures, etc.. The pattern is characterized by a contracting range in prices coupled with an upward trend in prices known as a rising wedge or a downward trend in prices known as a falling wedge. RISING WEDGE   WWW.FURTHERGROW.IN   THE rising wedge is a chart pattern which is formed in the uptrend of stocks When this pattern is found in an uptrend, it is considered a reversal pattern, as the contraction of the range indicates that the uptrend is losing strength. When this pattern is found in a downtrend, it is considered a bearish pattern, as the market range becomes narrower into the correction, indicating that the correction is losing strength, and that the resumption of the downtrend is in the making.  FALLING WEDGE WWW.FURTHERGROW.IN THE falling wedge is a chart pattern whi

BROADENING TOP

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BROADENING TOP   Broadening top is technical analysis chart pattern describing trends of stocks, commodities, currencies, and other assets. Point of Formation Broadening Top formation appears much more frequently at tops than at bottoms. It is a difficult formation to trade in. Its formation usually has bearish implications. Role of Big Players It is a common saying that smart money is out of market in such formation and market is out of control. In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage. Price & Volume  Price keeps on swinging unpredictably and one can't be sure where the next swing will end. Regarding the shares volume, it is very irregular and leaves no clue to the direction of the next move. *******

TRIPLE TOP AND TRIPLE BOTTOM

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TRIPLE TOP AND TRIPLE BOTTOM Triple top and triple bottom are reversal chart patterns used in the technical analysis of stocks, commodites, currencies, and other assets. TRIPLE TOP FORMATION The formation of triple tops is rarer than that of double tops in the rising market trend. The volume is usually low during the second rally up and lesser during the formation of the third top. The peaks may not necessarily be spaced evenly like those which constitute a Double top. The intervening valleys may not bottom out at exactly the same level, i.e. either the first or second may be lower. The triple top is confirmed when the price decline from the third top falls below the bottom of the lowest valley between the three peaks. TRIPLE BOTTOM    SELLING STRATEGY TRIPLE TOP There are several different trading strategies that can be employed to take advantage of this formation. Of course, first and second peaks are perfect point to place sell orders

CUP AND HANDLE

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CUP AND HANDLE   The cup and handle formation (also called the cup with handle formation) is a bullish chart pattern that is defined by a chart where a stock drops in value, then rises back up to the original value, then drops a small amount in value, and then rises a small amount in value. WWW.FURTHERGROW.IN The cup and handle formation (also called the cup with handle formation) is a bullish chart pattern that is defined by a chart where a stock drops in value, then rises back up to the original value, then drops a small amount in value, and then rises a small amount in value. THERE ARE TWO TYPES OF CUP AND HANDLES  1.) BULLISH 2.)BEARISH                                        BULLISH WWW.FURTHERGROW.IN BEARISH WWW.FURTHERGROW.IN  Important characteristics • Trend: A cup and handle formation should follow an increase trend, ideally one that is only a few months old. The older the increase trend, the less likely it is that the cup and handl

GAP THEORY

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GAP THEORY   WWW.FURTHERGROW.IN    A gap is an area on a price chart in which there were no trades. Normally this occurs after the close of the market on one day and the next day’s open. Lot’s of things can cause this, such as an earnings report coming out after the stock market had closed for the day. If the earnings were significantly higher than expected, this could result in the price opening higher than the previous day’s close. If the trading that day continues to trade above that point, a gap will exist in the price chart.  Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement.  Gaps appear more frequently on daily charts, where every day is an opportunity to create an opening gap. Gaps can be subdivided into four basic categories: WWW.FURTHERGROW.IN • Common gap • Breakaway gap • Runaway/ Continuation gap • Exhaustion