zlib.pub_getting-started-in-chart-patterns

["Glossary Average The sum of the scores divided by the number of scores. Average rise or decline (ARD) I measure the rise from the breakout price to the ulti- mate high, or the decline from the breakout price to the ultimate low, for each stock, and then compute the average. Bear market I used the peak in the Standard & Poor\u2019s 500 index on March 24, 2000, and the low on October 10, 2002, as the start and end of a bear market. Breakout Table G.1 shows the breakout location for each pattern. TABLE G.1 Breakout Location for Chart Patterns Chart Pattern Breakout Location Broadening patterns, all types A close outside the trendline boundary Diamond Tops and Bottoms A close outside the trendline boundary Double Bottoms, all types A close above the highest peak between the two valleys Double Tops, all types A close below the lowest valley between the two peaks Flags A close outside the trendline boundary Flags, High and Tight A close outside the trendline boundary or highest peak in the pattern Head-and-Shoulders Tops A close below the upsloping neckline, or a and Complex Tops close below the low between the head and right shoulder for downsloping necklines Measured Move Down or Up Not applicable Pennants A close outside the trendline boundary Pipe Bottoms A close above the highest spike in the pattern Pipe Tops A close below the lowest spike in the pattern Rounding Bottoms A close above the right lip Scallops, Ascending and Inverted A close above the highest peak in the pattern Three Rising Valleys A close above the highest peak in the pattern (continued) 287","288 GLOSSARY Chart Pattern TABLE G.1 (Continued) Breakout Location Triangles, Ascending Triangles, Descending A close outside the trendline boundary Triangles, Symmetrical A close outside the trendline boundary Triple Bottoms A close outside the trendline boundary Triple Tops A close above the highest peak in the pattern A close below the lowest valley in the pattern Breakout volume The volume level on the breakout day. Bull market Every date outside of the bear market from March 24, 2000, to October 10, 2002, as posted by the Standard & Poor\u2019s 500 Index. Busted pattern performance A chart pattern that reaches the ultimate high or low less than 10% away from the breakout and then reverses direction. The performance measures how far prices move in the new direction (the direction opposite the break- out) before reaching a new ultimate high or low. CCI The commodity channel index, a price momentum oscillator that compares the current mean price with the average of its mean price. I use a 20-day lookback with a five-day DCCI signal line. I use it most for spotting divergences between the indicator and price. Confirmation point, price, level, or line Also known as the breakout point, price, level, or line\u2014a price or location that validates a chart pattern. Consolidation See Continuation. Also, when prices move horizontally instead of trending upward or downward. A consolidation is an area of price congestion. Consolidation region A solid block of prices or a region in which prices switch from trending to moving sideways. Continuation For chart patterns, I use this term as a synonym for consolidation. For a continuation, prices must break out in the same direction as they entered the pattern. For example, if price enters the pattern from the bottom and exits out the top, the pat- tern acts as a continuation. Contrast with reversal. Countertrend pattern A pattern with an upward breakout in a bear market or a downward breakout in a bull market. The breakout direction is against the prevailing market trend. Corrective phase Part of a measured move up or down, a region where prices retrace a portion of the prior move. Day trading Entering and exiting a trade usually within the same day. Days to ultimate high or low The average time from the date of the breakout to the date of the ultimate high or low.","Glossary 289 DCCI Dual CCI, a five-day exponentially smoothed moving average of the CCI. Fibonacci retrace See Retrace. Flat base A consolidation region in which prices touch or near the same price multi- ple times over several weeks or months, and identification is usually easiest on the weekly scale. The bottom of this region appears flat and sometimes forms the base of an impending up-move, hence the name, flat base. Some chart patterns (such as double and triple bottoms, or head and shoulders) form after a flat base, the bottom of the chart pattern will usually reside slightly below the flat base level. Gaps When today\u2019s high is below yesterday\u2019s low, or today\u2019s low is above yesterday\u2019s high, a gap appears on the price chart. A gap closes when price later retraces and covers the gap. Half-staff formation Chart patterns such as flags, pennants, and even members of the triangle family (ascending, descending, or symmetrical) sometimes appear midway in the price move. Horizontal consolidation region A horizontal, or almost horizontal, congestion area where prices share a common value for an extended time (usually weeks to months). Flat price tops or flat bottoms are the preferred appearance. Intermediate term Between three and six months. Intraday Within a single trading day. Limit order An order to buy for no more or to sell for no less than a specified price. Linear regression A mathematical method to fit a straight line to a series of numbers; the slope of the resulting line gives the trend. Long term Lasting over six months. Measure rule Varies from pattern to pattern but is usually the pattern height added to (upward breakouts) or subtracted from (downward breakouts) the breakout price. The result is the predicted price target. Price often falls short of the target, so use half the height in the measure rule computation. Median Median value is the middle one in a sorted list of values such that half the values are below the median and half above. If no middle value exists, the average of the two closest values is used. For example, in the list 10, 15, 30, 41, and 52, the median is 30 because there are two values on either side of it. Neckline A trendline joining the valleys (head-and-shoulders top) or peaks (head-and- shoulders bottom). A close below or above the neckline, respectively, means a breakout. Partial decline After price touches a top trendline, it declines but does not touch (or come that close to) a lower trendline before forming a distinct valley and usually staging an immediate upward breakout. Partial declines must begin before the actual breakout and form after a valid chart pattern appears (in other words, after the minimum num- ber of trendline touches, usually two, and any other criteria needed to establish a valid pattern). Applies to broadening patterns and rectangles.","290 GLOSSARY Partial rise After price touches a lower trendline, it rises but doesn\u2019t touch (or come that close to) the upper trendline before forming a distinct peak and usually staging an immediate downward breakout. The partial rise must begin before the breakout and form near the end of a valid chart pattern (in other words, after the minimum number of trendline touches, usually two, and any other criteria needed to establish a valid pat- tern). A partial rise applies to broadening patterns and rectangles. Position trading Trading that holds a security overnight, sometimes maintaining a position for weeks, months, or longer, but not buy-and-hold forever. Pullback Occurs after a downward breakout when price returns to, or comes very close to, the breakout price or trendline within 30 days. There must be white space between the breakout point and the pullback low. The white space rule prevents the pullback term being applied to prices clustering near the breakout price. Contrast with throwback. Retrace After trending, prices give back some of their gains. That movement is called a retrace of the prior move. Reversal A price reversal occurs when price enters and exits the chart pattern from the same direction. RSI The Welles Wilder relative strength index, a price momentum indicator. Short When a stock is sold with the expectation that a trader can buy it back at a lower price. Short term Lasts up to three months. Stop or stop-loss order An order to sell at a price below or to buy at a price above the current price. Swing trading Short-term trading that takes advantage of price swings from retrace low to crest high or the reverse. Tall or short patterns I measure the formation height by taking the difference be- tween the highest peak and the lowest valley in the chart pattern, and then dividing the difference by the breakout price to get a percentage of height to price. I use the median value as the difference between short (values below the median) or tall (values above the median). Throwback Occurs after an upward breakout when price declines to, or comes very close to, the breakout price or the chart pattern trendline within 30 days. There must be white space between the hooking price action of the throwback and the breakout price. Contrast with pullback. Trend change When price goes from trending up to down or horizontal, or horizon- tal to up or down. Trend start Where the trend begins. To find the trend start, begin at the formation start and move backward in time. If prices climb leading away from the formation, find the highest peak before price closes 20% or more below and before the highest peak. When this occurs, the highest peak marks the trend start.","Glossary 291 If prices drop leading away from the chart pattern (working backward in time), find the lowest valley before price closes 20% or more above and before the lowest val- ley. When that occurs, the lowest valley marks the trend start. In many cases, I ignored brief price price overshoot or undershoot just before the chart pattern begins. For flags and pennants, the peak (swing high) or valley (swing low) closest to the start of the trend leading to the flag or pennant is used (not a 20% trend change). Ultimate high I determine the ultimate high by looking after the breakout for the highest peak before prices decline by 20% or more, measured from the highest peak to the close. I stopped looking if price closed below the formation low, assuming that a stop-loss order would be placed at that location. Ultimate low I determine the ultimate low by looking after the breakout for the low- est valley before a minimum 20% price rise, measured from the lowest valley to the close. I stopped looking if price closed above the formation high, assuming that an in- vestor would have placed a stop-loss order at that price. Volatility stop A method of stop placement such that normal price volatility will not result in the triggering of a stop-loss order. I use the average of the high-low price differ- ence of 30 days multiplied by 1.5. A stop should not be placed closer than the result subtracted from the current low price. Yearly price range or yearly trading range The price range that the security traded over the prior 12 months. To determine the yearly trading range, start from the day before the breakout and find the highest peak and lowest valley over the prior 12 months. I divided the yearly price range into thirds and compared the breakout price with each third.","","Index of Chart and Event Patterns Broadening Bottoms, page 124 Broadening Wedges, Ascending, page 102 Broadening Formations, Right- Angled and Ascending, page 133 Broadening Wedges, Descending, page 129 Broadening Formations, Bump-and-Run Reversal Right-Angled and Descending, Bottoms page 133 Broadening Tops, page 124 Bump-and-Run Reversal Tops 293","294 INDEX OF CHART AND EVENT PATTERNS Closing Price Reversal Diamond Tops, page 138 Open Near High Close Near Close Near Low and High and Below Above Prior Close Prior Close Open Near Low Double Bottoms, Adam & Adam, page 109 Uptrend Downtrend Cup with Handle AA Double Bottoms, Adam & Eve, page 109 Cup with Handle, Inverted AE Double Bottoms, Eve & Adam, page 109 Dead-Cat Bounce, page 185 EA Double Bottoms, Eve & Eve, page 107 Dead-Cat Bounce, Inverted, EE page 189 Double Tops, Adam & Adam, Diamond Bottoms, page 138 page 144 AA","Index of Chart and Event Patterns 295 Double Tops, Adam & Eve, Head-and-Shoulders Bottoms, page 144 page 119 AE Double Tops, Eve & Adam, LS page 144 RS EA H Head-and-Shoulders Bottoms, Complex Double Tops, Eve & Eve, SS SS page 144 H EE Head-and-Shoulders Tops H LS RS Flags, page 151; Flag, Earnings, page 201 Head-and-Shoulders Tops, Complex, page 157 HH SS Flags, High and Tight, page 74 Hook Reversal Gaps Open Near High Close Near High Close Near Low G Inside Day Open Near Low Inside Day Uptrend Downtrend","296 INDEX OF CHART AND EVENT PATTERNS Horn Bottoms Key Reversal Open Above Close Above Last Close Previous High HH Close Below Open Below Previous Low Last Close Horn Tops Outside Day Outside Day HH Uptrend Downtrend Measured Move Down, page 162 Inside Days Island Reversals, Bottoms Measured Move Up, page 162 One-Day Reversals, Bottoms GG One-Day Reversals, Tops Island Reversals, Tops GG Islands, Long G G","Index of Chart and Event Patterns 297 Open-Close Reversal Rectangle Bottoms Open Near High Close Near Low but Above Prior Close Close Near High Rectangle Tops but Below Rounding Bottoms, page 92 Prior Close Uptrend Open Near Low Downtrend Outside Days Pennants, page 151 Rounding Tops Pipe Bottoms, page 80 Scallops, Ascending PP Scallops, Ascending and Inverted, page 84 Pipe Tops, page 169 PP Pivot Point Reversal Scallops, Descending Close Above Previous High Close Below Previous Low Uptrend Downtrend","298 INDEX OF CHART AND EVENT PATTERNS Scallops, Descending and Triangles, Descending, page 97 Inverted Shark-32 Triangles, Symmetrical, Spikes or Tails page 173 Uptrend Downtrend Triple Bottoms, page 113 Spike High Spike Low TB TB TB Three Falling Peaks Triple Tops, page 179 1 2 TT TT TT 3 Three Rising Valleys, page 88 Wedges, Falling 3 2 1 Triangles, Ascending, page 173 Wedges, Rising","Index of Chart and Event Patterns 299 Weekly Reversals, Downside Wide-Ranging Days Close Close Near Near Low High Weekly Reversals, Upside Bearish Reversal Bullish Reversal","","Index Page numbers in italics refer to illustrations. Adam & Adam Bollinger bands, 59, 128, 149\u2013150, 205 double bottoms, 108, 109, 274, 281 Bottom(s), see specific types of patterns double tops, 146\u2013147, 274, 281 Bowl pattern, 143 Breakaway gap, 196\u2013197 Adam & Eve Breakeven, 14, 144 double bottoms, 107, 109, 274, 281 Breakeven failure rate, 279 double tops, 146\u2013147, 274, 282 Breakout, defined, 287\u2013288. See also specific types Announcements, impact of, 189\u2013190. See also of breakouts Earnings announcements Breakout day Ascending and inverted scallops, see Inverted and gaps, 54\u201355, 100, 122 ascending scallops volume, 16 Breakout point, 87 Ascending broadening wedges, 102\u2013107 Breakout volume, 23, 77, 87, 90, 288 busted, 216, 218 Broadening bottom pattern, 124\u2013128 characteristics of, 28\u201329 busted, 216, 219\u2013220 performance and rank, 281 case studies, 128\u2013129, 259 characteristics of, generally, 57, 58, 139, 172, Ascending scallop, case illustration, 256\u2013257 Ascending triangles, 173\u2013177 255, 280 performance and rank, 280 breakout location, 288 performance statistics, 35, 36 case study, 177\u2013179, 240\u2013241 yearly price range, 274 characteristics of, 52, 54\u201355, 65, 66 Broadening formations performance and rank, 283 ascending, 28\u201329, 102, 216, 218, 281 yearly price range, 275 bottom, 57, 58, 124, 259, 274, 280 Average, generally busted ascending wedge, 216, 218 defined, 287 busted bottoms, 216, 219\u2013220 loss, 7 busted descending wedge, 216, 220\u2013221 volume, 38, 42 busted right-angled and ascending, 216, Average rise or decline, 74, 82, 126\u2013127, 159, 203, 218\u2013219 279, 287 busted right-angled and descending, 216, 221 Averaging down, 270\u2013271 busted tops, 217 descending wedge, 129, 194, 251, 259 Bad earnings surprise, 193\u2013196 performance and rank table, 280\u2013281 case illustrations, 193\u2013194, 196\u2013197 right-angled and ascending, 44, 90, 133, 274, 280 performance and rank, 284 right-angled and descending, 59, 133, 180, 259, Bearish gap, 55 274, 280 Bearish patterns, 135, 160, 268 tops, 42, 59\u201360, 124, 133, 134, 252, 274, 280 Bearish tail, 62 wedges, 274 Bearish trends, 56 Bear market, 46, 49\u201351, 179, 195, 208, 273, 287 Big W chart pattern, 109, 111, 116, 255 301","302 INDEX Broadening tops, 124\u2013128 Channels, trendlines and, 31, 42, 153 busted, 217 Closing a gap, 196 characteristics of, 42, 59\u201360, 133, 134, 252, Closing price, 62 274, 280 Comfort zone, 10\u201311, 277 performance and rank, 280 Commissions, 8, 92, 216 Commodities, 272 Brokerage firms, 205, 207 Commodity channel index (CCI), 63\u201364, 128, Bullish gap, 55 Bullish tail, 62\u201363 200, 205, 242\u2013243, 288 Bull market, 45, 49\u201351, 54\u201355, 57, 69, 130, 147, Complex head-and-shoulders bottoms, 275, 282 Complex head-and-shoulders tops 171, 179, 182, 195, 198, 207\u2013208, 212, 241, 274, 278, 288 breakout location, 287 Bull trap, 129, 132 characteristics of, 275, 282 Busted patterns Confirmation, generally ascending triangle, 230, 231\u2013232 importance of, 119, 145, 146, 147, 213 broadening, 216\u2013222 line, 87, 89\u201390, 92, 105, 107, 109\u2013110, 112, case studies, 222\u2013223, 228\u2013230, 235\u2013237 characteristics of, 215, 270 170, 179, 180, 181, 288 descending triangle, 230, 232\u2013233 point, 87, 288 diamonds, 223\u2013224, 226\u2013227 price, 87, 114, 116 falling wedge, 234\u2013235 Congestion patterns, 75\u201376, 110, 140. See also head-and-shoulders, 223, 225\u2013227, 229\u2013230 performance, 99, 288 Horizontal consolidation regions rectangle, 230, 231 Consensus estimate, 194, 205 rising wedge, 230, 235 Conservative traders, strategies for, 232 symmetrical triangle, 173, 192, 230, Consolidation\/consolidation region, 39, 75, 288 233\u2013234 Continuation(s), 91, 101, 105, 140, 203, 288 triangle, generally, 99 Converging trendlines, 174 Busted trade, example of, 12 Corrective phase, 46, 64, 105, 116, 164\u2013168, 288 Butrimovitz, Gerald, 7 Countertrend pattern, 288 Buy-and-hold mentality, 161 Cup formation, 95\u201397 Buy-and-hold strategy, 270 Cup with handle, 54 Buying checklist, 262\u2013267 Buying demand, 63 Daily high\u2013low range, 65 Buy orders, timing of, 273 Daily scale, 80, 82, 85, 90, 93\u201394, 150, 169 Buy signals Days to ultimate high\/low, 199, 288 ascending broadening wedge, 102\u2013107 Day trading, 261, 288 ascending scallop, 257 Dead-cat bounce, 185\u2013188 descending triangles, 97\u2013102 diamond tops and bottoms, 142 bounce phase, 187, 189 double tops, 150 case study, 188 earnings flags, 204 event decline, 187 Eve & Eve double bottoms, 102, 107\u2013113, 128 inverted, 189\u2013193 head-and-shoulders bottoms, 119\u2013122, 191 performance and rank, 284 high, tight flag, 74\u201380 postbounce phase, 187 inverted and ascending scallops, 84\u201388 yearly price range, 276 pipe bottoms, 80\u201384 Decline rounding bottoms, 92\u201397 average, 159, 212, 279 symmetrical triangles, 161, 193, 237 intermediate-term, 116, 121 three rising valleys, 88\u201392 long-term, 116, 121, 141, 147 top ten, 73\u2013122 partial, 57\u201359, 103, 127, 131, 134\u2013135, 136, trendlines, generally, 25 triple bottoms, 113\u2013118 180, 231, 289 quick, 60\u201361, 138\u2013139 Candlesticks, Fibonacci, and Chart Patterns Trending short-term, 116, 121, 141 Tools (Fischer\/Fischer), 37 Descending broadening wedge, 129\u2013131 busted, 216, 220\u2013221 Case studies, see specific chart patterns case studies, 131\u2013133, 251, 259 characterized, 194 identification of, 95 performance and rank, 281","Index 303 Descending triangles, 97\u2013102 Downward spike, 62 breakout location, 288 Dual CCI (DCCI), 64\u201365, 242\u2013243, 289 characteristics of, generally, 47, 54 performance and rank, 283 Earnings announcements yearly price range, 275 bad news, 193\u2013197, 276, 284 good news, 197\u2013201, 276, 284 Diamond bottoms, 138\u2013142 impact of, 132, 192, 253 breakout location, 287 busted, 223 Earnings flags, 201\u2013203 case study, 142\u2013144 case studies, 203\u2013205, 252\u2013253 characteristics of, 54 characteristics of, 142 identification of, 170, 172 identification of, 204 performance and rank, 281 performance and rank, 284 yearly price range, 274 yearly price range, 276 Diamond tops, 138\u2013142 EMC, case illustration, 249\u2013252 breakout location, 287 Emotional trading, 14, 74, 271, 278 busted, 223, 224 Encyclopedia of Chart Patterns, Second Edition case study, 142\u2013144 identification of, 60, 61 (Bulkowski), 130, 132, 147, 270 performance and rank, 281 Eve & Adam Diamond patterns, see also Diamond bottoms; double bottoms, 109, 274, 281 Diamond tops double tops, 144\u2013147, 274, 282 Event decline, 187 busted patterns, 223\u2013224, 226\u2013227 Event patterns characteristics, generally, 159 bad earnings surprise, 193\u2013197, 276 Diversification, 271\u2013272 dead-cat bounce, 185\u2013189 Dome-shaped volume, 101, 167 earnings flag, 201\u2013205, 276 Double bottoms, 107\u2013111 good earnings surprise, 197\u2013201, 276 Adam & Adam, 281 inverted dead-cat bounce, 189\u2013193 Adam & Eve, 281 performance and rank table, 284 breakout location, 287 stock downgrades, 205\u2013209, 276 Eve & Adam, 109, 274, 281 stock upgrades, 209\u2013214, 276 Eve & Eve, 281 Exit strategy, 84, 88, 95. See also Sell signals identification of, 213 External trendlines, 17\u201319, 31 yearly price range, 274 Double tops, 144\u2013148 Failure rates, 273. See also specific chart patterns Adam & Adam, 281 Failure swing, 265, 269 Adam & Eve, 144 Falling markets, 277 breakout location, 287 Falling wedge, 16, 54, 153, 166, 168 case study, 148\u2013151 Fibonacci retracement, 36\u201338, 48, 58\u201359, 66, 134, characteristics of, 35 Eve & Adam, 144\u2013147, 274, 282 181, 222 Eve & Eve, 144 Flagpole, 253 Dow Jones Industrials, 110, 251, 269 Flags Dow Jones Transportation index, 110, 259 Dow Jones Utility index, 70, 110 breakout location, 287 Downsloping flag, 152 case study, 156\u2013157 Downsloping necklines, 160, 191 characteristics of, generally, 38, 46, 47, 61, 115, 151 Downsloping pennant, 152, 153 earnings, 201\u2013205, 284 Downsloping trendlines, implications of, 18, earnings announcements, 194 development of, 190 22\u201323, 24, 25, 29\u201331, 47, 77, 90, 98, 101, high, tight, 46\u201347, 54, 74, 79, 241, 244\u2013246, 117, 118, 159, 180, 225\u2013226, 230, 232 Downtrends, 82, 89, 93, 113 275, 282, 287 Downward breakout, 29\u201331, 40\u201341, 61, 67, 69\u201370, identification of, 172 97\u201398, 105, 126\u2013128, 132, 134\u2013137, performance and rank, 282 141\u2013142, 144, 153, 156, 161, 175\u2013178, 182, tight, 161 194\u2013195, 207, 210\u2013212, 216\u2013221, 224\u2013226, yearly price range, 274\u2013275 231\u2013235, 243, 258, 273\u2013276, 280\u2013282 Flat base, 96, 110, 115\u2013116, 153, 289 Flat bottoms, 40 Flat tops, 40","304 INDEX Gaps, generally Intraday, generally breakout day, 100, 122 defined, 289 busted patterns, 223 high, 30, 62, 198 defined, 289 high\u2013low trading range, 195 low, 62 Giant Industries, case illustration, 243\u2013246 scale, 271 Good earnings surprises trading range, 207, 211 case study, 199\u2013201 Inverted and ascending scallops, 84\u201388 identification of, 198 breakout location, 287 performance and rank, 284 characteristics of, 19, 275 trading\/trading tips, 199 performance and rank, 283 yearly price range, 275 Half-staff formation, 38, 115, 140, 151\u2013152, 154, 257, 289 Inverted dead-cat bounce, 189\u2013190 case studies, 191\u2013192 Head-and-shoulders bottoms, 119\u2013122 characteristics of, 61 busted, 223, 228 performance and rank, 284 characteristics of, generally, 39\u201340, 54, 69 head, 120 Investment banks, 207 identification of, 120, 189, 191 Island reversals, 69 Head-and-shoulders patterns JLG Industries, case illustration, 255\u2013258 bottoms, 39\u201340, 54, 69, 119\u2013122, 189, 191, 223, 228, 275 Lam Research, case illustration, 246\u2013249 busted, 223, 225\u2013227 Late entry, 272\u2013273 busted bottom, 223, 228 Left shoulder, in head-and-shoulders patterns, busted tops, 223, 225\u2013226, 229 complex bottoms, 275 119, 120, 144, 158, 160, 161 complex tops, 275, 287 Limit orders, 117, 289 tops, 41, 138, 143\u2013144, 157\u2013160, 223, Linear regression, 150, 156, 289 225\u2013226, 229, 275, 287 Long spikes, 81 Long-term, generally Head-and-shoulders top, 157\u2013160 breakout location, 287 chart, 46 busted, 223, 225\u2013226, 229 decline, 116, 121, 141, 147 case study, 160\u2013162 defined, 289 characteristics of, generally, 41 downtrends, 82 identification of, 67, 70 holders, 82 performance and rank, 138, 282 rise, 126, 130, 136, 159 trades, 10, 38 Higher lows, 56\u201357 trendlines, 21 High velocity, 140, 159, 182 Loose flag, 154, 155, 244 High-volume breakout, 68\u201369 Lower highs, 56\u201357 Horizontal consolidation regions, 39\u201342, 48, 71, Low velocity, 140, 159 172, 259, 289 Market correction, 277 Horizontal flag, 152 Market downturn, 94, 143 Horizontal pennant, 152 Market orders, 41, 63, 205 Horn bottoms, 80 Market risk, 118 Market trends, 150, 234, 269 IMC Global, case illustration, 239\u2013243 Measure rule Industry relative strength, 262 Industry trends, 150, 198, 234, 268, 270 applications, see specific chart patterns Insider sales, 5\u20136, 194 implications of, 84, 208, 289 Inside weeks, 83 trendlines, 23\u201325, 31 Intermediate-term, generally Measured moves down, 162\u2013168 breakout location, 287 declines, 116, 121 case study, 169, 183 defined, 289 characteristics of, 30, 47, 131 downtrends, 82 simple ABC correction, 164 rise, 126, 130, 136, 159 trendlines, 21 Internal trendlines, 18\u201319, 31, 55","Index 305 Measured moves up, 162\u2013168 Pipe bottoms, 80\u201384 breakout location, 287 breakout location, 287 case studies, 168, 254\u2013255 case studies, 84, 248\u2013250 characteristics of, 30 identification of, 54, 83, 170, 172 earnings announcements and, 197 performance and rank, 283 identification of, 166, 198 yearly price range, 275 implications of, 197 simple ABC correction, 163\u2013164 Pipe tops, 169\u2013171 breakout location, 287 Median, 68, 289 case study, 171\u2013172 Megaphone price trend, 125 yearly price range, 275 Mental stop, 200 Momentum Position traders\/investors, strategies for, 82, 110, 116\u2013117, 190, 290 implications of, 29, 56\u201357, 205, 242\u2013243 relative strength index (RSI) indicator, 128, 290 Premature breakout, 99, 100 Moving average convergence\/divergence (MACD), Price behavior, focus on, 10\u201311 Price bump, 29 128, 149\u2013150 Price movement trends, 25\u201329, 273 Mutual funds, 38, 74, 157 Price reversal, 19, 29, 41, 44, 89\u201390, 91, 273 Price target Narrow patterns, implications of, 77, 86, 91\u201392, 96, 100, 105, 110, 148, 182 determination of, 101, 196, 199, 208, 268 importance of, 272 NASDAQ Composite, 64, 110, 246, 248, 251, 269 measure rule computation, 24 Neckline setting, 14 Profit(s), generally busted head-and-shoulders bottom, 228 barriers, 13\u201314 defined, 289 ignoring, 10 head-and-shoulders bottoms, 119\u2013120, 121, opportunities, 82 -taking guidelines, 203 122, 191 target, 14 head-and-shoulders formation, generally, 39\u201341 Progressive stops, 252 head-and-shoulders tops, 158, 160, 162 Pullbacks case illustrations, 243\u2013244, 258\u2013259 On-balance volume, 149\u2013150 characteristics of, 24\u201325, 29\u201330, 269, 279 1-2-3 trend change, 25\u201328, 31, 90, 268 defined, 290 Opening price, 62 earnings announcements and, 196 Outside weeks, 84 implications of, generally, 67\u201369,126\u2013127, 136, Overhead resistance, implications of, 39, 40, 64, 69, 148, 154\u2013155, 159, 171, 174, 182, 217\u2013221, 77, 82, 90, 96, 111, 116, 121, 154, 166, 199, 224\u2013225, 230\u2013235, 237, 269, 273, 279 208, 250, 269 stock downgrades, 208 Overtrading, 277 stock upgrades, 212 Paper trading, 12 Rectangles Partial decline, 42, 103, 127, 131, 134\u2013136, 140, busted patterns, 230, 231 characteristics of, 153 231, 256, 289 tops, 54, 122 Partial rise, 45, 103\u2013105, 126\u2013127, 132, 134\u2013136, Relative Strength Index (RSI), 128, 200\u2013201, 205, 180, 290 242\u2013243, 290 Peak(s), see also specific chart patterns Resistance, see Support and resistance highest, 78, 83 Retrace, defined, 36, 290 implications of, 38\u201339, 47 Retracement lower, 56 support and resistance zones, 42\u201346 case illustration, 242 V-shaped, 179 high, tight flags, 77 Pennants, 151\u2013156 implications of, 36\u201338, 46, 48, 63\u201364, 163, breakout location, 287 case study, 156\u2013157 257, 268 characteristics of, 61, 64, 69, 75\u201376, 78, 142 triple bottoms, 116 development of, 190 Reversal chart patterns, 31, 89\u201390, 91, 105, 140, performance and rank, 282\u2013283 yearly price range, 275 144, 151, 203, 217, 220, 234, 270, 273, 290","306 INDEX Right-angled and ascending broadening formations, earnings flags, 204 133\u2013137 Eve & Eve double bottoms, 110 flags, 156\u2013157 busted, 216, 218\u2013219 good earnings announcements and, 199\u2013200 case study, 137\u2013138 head-and-shoulders tops, 160\u2013161 characteristics of, 45, 90 inverted and ascending scallops, 86\u201387 performance and rank, 280 pennants, 156\u2013157 yearly price range, 274 stock downgrades, 207 Right-angled and descending broadening symmetrical triangles, 193, 197 trendlines, generally, 25 formations, 133\u2013137 triple bottoms, 116, 118 busted, 216, 221 Shark-32 pattern, 250 case studies, 137\u2013138, 252, 257, 259 Short, defined, 290 characteristics of, 59, 180 Short Course in Technical Trading, A (Kaufman), 65 performance and rank, 280 Shorting a stock, 70, 170, 183, 195, 207, 217\u2013218, yearly price range, 274 Right shoulder, in head-and-shoulder patterns, 221, 232, 235, 249, 273 Short patterns, implications of, 82\u201383, 91, 96, 119, 120, 122, 144, 158, 160, 161, 191, 228 Rise 105, 110, 127, 131, 136\u2013137, 159, 171, 175, 182, 290 average, 82\u201383, 203, 212, 279 Short-term, generally high velocity, 182 decline, 116, 121, 141 intermediate-term, 130, 136, 159 defined, 290 long-term, 130, 136, 159 downtrends, 82 moderate, 77 rise, 126, 130, 136, 148, 159 partial, 57\u201360, 103\u2013105, 126\u2013127, 132, trendlines, 21 Shoulder lows, head-and-shoulder formation, 39 134\u2013136, 180, 290 Sideways price movement, 39, 76 quick, 60\u201361, 138\u2013139 Simple ABC correction short-term, 130, 136, 148, 159 characteristics of, 163\u2013164 Rising wedge, 153 trading tips, 165 Rohm and Haas, case illustration, 252\u2013255 Southwest Airlines, case illustration, 258\u2013260 Rounding bottoms, 92\u201397 Spikes breakout location, 287 implications of, 62\u201365 case illustration, 248 one-day, 179 performance and rank, 283 pipe bottoms, 81, 83 yearly price range, 275 pipe tops, 169\u2013171 Rounding tops, performance and rank, 283 Standard & Poor\u2019s 500, 46, 70, 109, 178, 183, 201, Rounding turns, 10, 93\u201396, 98, 249 241, 242\u2013243, 244, 245, 246, 247, 249, 251, Round number support and resistance, 41\u201342, 45, 48 253, 255, 256, 257, 258, 259, 260, 269 Stock downgrades, 205\u2013208 Scallops, see Inverted and ascending scallops case study, 208 Scenario trading, 13 performance and rank, 284 Security review checklists yearly price range, 276 Stock market crash of 1987, 38 before buying, 262\u2013267 Stock splits, 142 how to sell, 267 Stock upgrades, 209\u2013212 when to sell, 267\u2013269 case study, 213\u2013214 Selling checklists performance and rank, 284 how to sell, 267 yearly price range, 276 when to sell, 267\u2013269 Stop-loss orders, implications of, 7, 14, 22, 38, 41, Selling pressure, 63, 209 123, 177, 200, 271, 290. See also specific Sell signals chart patterns ascending broadening wedge, 104\u2013105 Stop running\/stop gunning, 41, 63 busted ascending broadening wedges, 218 Stops, types of busted head-and-shoulders bottom, 228 progressive, 252 case illustrations, 242\u2013243, 246, 255 trailing, 66\u201367, 84, 252 characteristics of, generally, 7, 11\u201312 volatility, 65, 67, 242, 246 curved trendlines, 19 dead-cat bounce, 188, 190 descending broadening wedge, 132, 221 double tops, 147","Index 307 Straight-line runs, 38, 57, 88, 111, 115, 139, 30-day average volume, 68, 77, 80, 87, 90, 101, 163\u2013164, 183, 188, 202, 230 130, 136, 154, 176 Support and resistance Three rising valleys, 88\u201392 ascending triangles, 174, 177 breakout location, 287 busted broadening patterns, 223 case illustration, 247 busted falling wedge, 234 performance and rank, 283 busted patterns, generally, 237 yearly price range, 275 busted rising wedge, 235 busted symmetrical triangle, 235\u2013236 Throwbacks channels, 42\u201344, 48 case illustrations, 251\u2013252 chart pattern, 35\u201336 defined, 290 defined, 34 implications of, 29\u201330, 35, 36, 66, 67\u201369, descending triangles, 100 77, 82, 92, 95, 96\u201397, 99, 111, 115, double tops, 147\u2013148 117, 121, 126\u2013127, 131, 141, Fibonacci retracements, 36\u201338, 48, 66 154\u2013155, 174, 199, 208, 212, good earnings announcements, 199, 200 217\u2013220, 224\u2013228, 231\u2013235, 260, head-and-shoulders tops, 162 269, 273, 279 horizontal consolidation regions, 39\u201342, 48 peaks, 38\u201339, 44\u201348 Tight flags and pennants, 154, 155, 161 pipe tops, 171 Trader Vic: Methods of a Wall Street Master round number, 41\u201342, 45, 48 short sale, 70\u201371 (Sperandeo), 27 symmetrical triangles, 174, 177 Trading Classic Chart Patterns (Bulkowski), 19, 63, trendlines, 42\u201344, 48 triple bottoms, 118 161, 191 triple tops, 181\u2013182 Trading diary, 271 utilization in trades, 44\u201347 Trading plan, 12\u201313. See also Trading system; valleys, 38\u201339, 45, 48 volume and, 42, 44, 48 Winning system weekly scales, influence on, 268 Trading psychology Swing high\/low, 78 checklist of, 276\u2013278 Swing traders, strategies for, 68, 82, 86, 96, comfort zone, 10\u201311, 277 impact of, 6\u20137 100, 104, 110, 116, 126, 130, 132, 151, negative thoughts, 9\u201310 156, 162, 212 profit barriers, 13\u201314 Swing trading, defined, 290 research, 8\u20139 Symmetrical triangles, 173\u2013177 sell signals, 11\u201312 breakout location, 288 stop\/stop-loss orders, 7 busted, 173, 192 trading plan, 12\u201313, 277 case studies, 177\u2013179, 192 winning system, 8, 270\u2013273, 277\u2013288 characteristics of, generally, 11\u201312, 54, 153, Trading range, 30, 63, 144, 195 160, 271 Trading system development of, 197 following, 8, 277 identification of, 35, 36\u201338, 161, 193, 198, refinement of, 13, 271\u2013272 200 selection factors, 8 performance and rank, 283 sell signals, 12\u201313 sell signals, 197 Trading tips, generally, 270\u2013273. See also specific shark-32 pattern, 250 yearly price range, 275 chart patterns Trailing stop, 66\u201367, 84, 252 Tails, characteristics of, 62 Trend changes, 31, 56, 197, 290 Tall patterns, implications of, 82\u201383, 86, 91\u201392, Trend channels, 150, 155, 156 Trending down\/up, 23 96, 100, 105, 126\u2013127, 131, 136\u2013137, 148, Trendline(s) see also Downsloping trendlines; 159, 171, 175\u2013176, 182, 196, 198\u2013199, 203, 208, 212, 270, 290 Upsloping trendlines Technical Analysis For Dummies (Rockefeller), 30 characteristics of, 17, 31\u201332, 55, 76 1-2-3 trend change method, 25\u201328, 31 sample trade using, 28\u201329, 32 support and resistance zones, 42\u201344, 48 touches, 21, 31, 104\u2013105, 125, 140, 174 touch spacing, 19\u201320, 31","308 INDEX Trend reversal, 56. See also Reversal chart patterns Volume Trend start, 75, 78, 290\u2013291 dome-shaped, 101, 167 Triangles implications of, 16 support and resistance zones, 42\u201344, 46, 48 ascending, 52, 54\u201355, 65, 66, 170, 173\u2013179, trendlines and, 22\u201323, 31 240\u2013241, 275, 283, 288 trends, see Volume trends U-shaped, 101, 167 busted ascending, 230, 231\u2013232 busted descending, 230, 232\u2013233 Volume trends busted symmetrical, 230, 233\u2013234 ascending triangles, 174 descending, 47, 54, 97\u2013102, 176, 275, 283, 288 broadening bottoms, 125 symmetrical, 54, 59, 60, 153, 160, 161, 173\u2013179, descending broadening wedge, 130 descending triangles, 99, 101 192, 193, 197, 198, 200, 250, 271, 275, 283, diamond tops and bottoms, 140\u2013141 288 double tops, 145 Triple bottoms, 113\u2013117 Eve & Eve double bottoms, 108, 111 breakout location, 288 flags, 153 case studies, 117\u2013118, 248 head-and-shoulders bottom, 119, 122 characteristics of, 54, 108, 110 head-and-shoulders top, 158\u2013159 identification of, 112 high tight flags and, 75\u201376 performance and rank, 283 inverted and ascending scallops, 86\u201387 yearly price range, 275 measured moves, 163, 167 Triple tops, 179\u2013183 pennants, 153 breakout locations, 288 pipe bottoms, 83 case study, 183 right-angled broadening formations, 134\u2013135 identification of, 35, 201 rounding bottoms, 94 performance and rank, 283 stock downgrades, 207 yearly price range, 275 stock upgrades, 211 Twin bottoms, 81 symmetrical triangles, 174 Twin-peak pattern, 56, 57 triple bottoms, 114 200-day moving average, 248 triple tops, 179, 182 Ultimate high, 81, 82, 199, 207, 212, 291 V-shaped peaks, 179 Ultimate low, 182, 195, 199, 207, 212, 274, 291 Unconfirmed pipe, 83 Wedge formations Underlying support, 39, 69\u201370, 83, 154, 159, 166 ascending broadening, 28\u201329, 102\u2013107, Upsloping flag, 152, 153 274, 281 Upsloping necklines, 160 broadening, 274 Upsloping pennant, 152, 153 busted broadening, ascending, 216, 218 Upsloping trendlines, 22, 24, 26, 27, 30\u201331, 86, busted falling, 234\u2013235 busted rising, 230, 235 102, 159, 181, 218, 225, 243, 268 descending broadening, 95, 129\u2013133, 194, Uptrends, 30, 38, 85 251, 259, 274, 281 Upward breakouts, 16, 21, 30\u201331, 39, 41, 54, 58, 61, falling, 54, 153, 166, 168 rising, 153 67, 76, 100, 106, 126\u2013127, 134\u2013137, 142, 153, 161, 174\u2013178, 198, 201\u2013202, 207, Weekly scale, 10, 46, 80\u201381, 93, 94, 96, 110, 211\u2013212, 216\u2013221, 224\u2013228, 231\u2013235, 116, 148, 169, 182, 268 273\u2013276, 280\u2013283 U-shaped volume, 101, 167 Widely spaced touches, 20 Wide patterns, implications of, 77, 91, 96, 100, Valley(s) characteristics of, 38\u201339, 57 105, 159, 182 lowest, 78, 83 Winning system support and resistance zones, 42\u201346 checklist for, 270\u2013271 Velocity, 140, 159 following, 8, 277\u2013278 Visualization exercises, 9\u201312 selection factors, 8 Volatility Yearly price range, 136, 199, 203, 291 low, 59 Yearly trading range, 136, 171, 182, 291 significance of, 271 stop(s), 65, 67, 242, 246, 291"]