Technical Analysis by Leavitt Brothers

Leavitt Brothers: Education
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Chart Patterns | Candlestick Patterns | Technical Analysis | Option Strategies | Bookshelf
Education
As with anything in life, education is a foundational building block of successful trading. But there is no holy Trade MT4-
grail out there. A "can't miss" strategy does not exist, but a general understanding of basic trading strategies is Regulated Firm
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In this section we discuss the 3-headed "technical" monster…chart patterns, candlestick patterns, and
technical analysis. We also cover popular option strategies, and of course we offer our recommended reading
on our bookshelf.
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http://www.leavittbrothers.com/education/[3/12/2009 10:43:42 AM]

Leavitt Brothers: Forget the Fundamentals

CHART PATTERNS | Candlestick Patterns | Technical Analysis | Option Strategies | Bookshelf
Chart Patterns
At the end of the day, the only thing that matters in the stock market is supply and demand. When there areCompany
more buyers than sellers, stocks go up. More sellers than buyers, stocks go down. A chart is simply a Stock
Research
graphical representation of supply and demand. Any news or information that is important or relevant will show
up in the chart. It is a totally unbiased, unemotional, direct representation of everything going on in the stock.
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History has shown that stocks often form patterns, and when these patterns are broken, price movements can
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Here we discuss numerous popular chart patterns used by successful traders. Today!
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Bullish Patterns Neutral Patterns Bearish Patterns
Symmetrical Triangles Symmetrical Triangles Symmetrical Triangles
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Where are
Technical Analysis of Stock Trends, 8th Technical Analysis of the
stocks
Edition Financial Markets and Bear Markets
headed?
by Robert Edwards, John Magee, by John J. Murphy by Stan Weinstein
The answer may
W.H.C. Bassetti (editor)
surprise you. Find
out now with
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http://www.leavittbrothers.com/education/chart_patterns/[3/12/2009 10:44:38 AM]

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http://www.leavittbrothers.com/education/chart_patterns/[3/12/2009 10:44:38 AM]

Leavitt Brothers: Education - Chart Patterns - Symmetrical Triangles

Bullish Patterns print this page

Symmetrical Triangles Symmetrical Triangles send to a friend
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Pennants Bullish symmetrical triangles represent neutral periods of doubt and Trade MT4-
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The best breakouts occur ½ to ¾ of the way through the pattern. A stock seems to gain energy as it is Forex and CFDs.
compressed into the triangle, but that energy dissipates beyond the ¾ point. It is recommended that Trade on MT4
traders abandon a stock that trades beyond the ¾ mark for very little movement is likely to occur. Volume with regulated
typically diminishes as the pattern develops because traders become more and more unsure as to the broker
stock's future direction. Then, seemingly without warning, the stock explodes out of the pattern. www.gcitrading.com/meta
Bullish symmetrical triangles appear in uptrends and typically resolve themselves to the upside. Breakouts
to the upside must be accompanied by a significant increase in volume to confirm the breakout. Failure to Where are
accomplish this doesn't automatically render the play invalid, but it does raise a yellow flag. Besides stocks
volume, the astute trader ought to look for a close above the most recent high. This price represents the headed?
previous area of selling pressure and an area where stockholders may be looking to “get out even.” It is The answer may
recommended that if volume does not accompany the break, and if the stock fails to make a higher high surprise you. Find
within a reasonable amount of time, the trader should move a sell stop up to protect profits. out now with
Chart of the Day.
The expected price movement upon breakout is approximately equal to the widest part of the pattern. www.chartoftheday.com
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http://www.leavittbrothers.com/education/chart_patterns/symmetrical_triangle_bullish.cfm[3/12/2009 10:45:57 AM]

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TEO formed a typically symmetrical triangle in an uptrend in the late winter months of '03. After steadily rallying on solid volume
(notice the black volume bars are generally bigger than the red ones) the stock made a lower high and a couple higher lows as the
stock was compressed by converging trendlines. Volume then surged on the mid-April breakout. Notice the widest part of the Trader Makes
pattern (approx. 1.75 points) accurately predicted the move from 4.25 up to 6.0. Textbook play. $4 Billion
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TRPS traded into a symmetrical triangle and broke out on massive volume. Notice the move from 10 to 20 into the pattern was
pretty good at forecasting the move from 20 to 30 upon breakout. Share Market
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BDY formed a solid symmetrical triangle pattern in the fall of '01 and provided a great move to the upside when the stock broke
out. Notice the volume; it was huge on the rally into the pattern, and than it significantly fell off within the pattern.That's exactly
what you want to see. Then volume surged again on the breakout. Textbook scenario.
» back to top

ForexCandlesticksMadeEasy.c



Symmetrical Triangles Ascending Triangles send to a friend
Ascending Triangles
Rectangles
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Ascending triangles form in uptrends and characterized by a series of Expert Advisor
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It is as if a massive sell order has been placed at the upper trendline and even though the stock is strong No commissions,
and in an uptrend, it takes some time to fully execute the order. Volume usually diminishes as the pattern Forex and CFDs.
develops. Once the overhead supply is absorbed, the stock is free to catapult higher because the lack of Trade on MT4
supply shifts the supply/demand imbalance to favor the buyers. Also, if indeed a stock is in a steady with regulated
uptrend, every stockholder who bought in the prior several months will be showing a gain. Satisfied and broker
happy stockholders rarely sell. This reality also helps to push the stock higher after the break.
The best breakouts occur ½ to ¾ on. Breakouts that art art breakouts occur &frac1e delayed until prices Where are
crowd into the apex usually fail or are mediocre at best. If by chance a stock trades below the lower stocks
trendline, it is not reason to go short. Instead, the trader ought to simply redraw the lower trendline and headed?
keep watching for an eventual break to the upside. This act of redrawing a trendline is pretty common. The answer may
Remember, drawing trendlines is a subjective art at best. They are the trader's best guess as to where surprise you. Find
support and resistance could be or should be, so redrawing them is perfectly permissible. out now with
Chart of the Day.
Breakouts should be accompanied by a significant increase in volume. Failure to accomplish this doesn't www.chartoftheday.com
render the breakout invalid, but a red flag is raised and appropriate stops should be employed.
There are two guidelines a trader can use to determine the extent of the rally upon breakout. The first
Company
expected price movement is approximately equal to the widest part of the pattern. The second price target
Stock
is equal to the rally into the pattern. The extent of the advance will often depend on the overall market. A Research
strong market will help greatly in achieving the more ambitious price target, but in a weak market, a trader 2,000 Stock
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http://www.leavittbrothers.com/education/chart_patterns/ascending_triangle_bullish.cfm[3/12/2009 10:47:43 AM]

Where are
stocks
headed?
ATH was in a steady uptrend when it consolidated in an ascending triangle pattern. Resistance is not perfectly defined but the
The answer may
series of higher lows maintains the generally upward nature of the stock. Volume didn't exactly surge on the breakout, but the
surprise you. Find
stock didn't pullback much, so there was never a reason to get out (remember, volume is used as a confirmation – not a decision
out now with
making element). Eventually the bulls stepped up and provided a nice gain for those patient enough to stay with the position.
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This is a textbook play for MOVI. Volume surge on the move into the pattern and then calmed down within the pattern. Then Might be the
volume surged again on the breakout. This is exactly the type of action you want to see. beginning of a
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AGI was in a steady uptrend when it traded into and then exploded out of this ascending triangle pattern. Notice how resistance is
very easy to determine (always a bonus when it's exact, and you don't have to estimate) and how volume dried up just prior to the
breakout.
» back to top

Technical
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Bullish Patterns print this pagesend to a friend

Symmetrical Triangles Rectangles
Ascending Triangles
Rectangles
Pennants
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Bullish rectangles represent large periods of doubt and indecision. They Expert Advisor
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are characterized by parallel trendlines as the forces of supply and Hosting
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Wedges Bullish rectangles appear in uptrends and typically resolve themselves to the upside. Breakouts to the Picks Free 14 Day
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Trendlines upside must be accompanied by a significant increase in volume to confirm the breakout. Failure to
accomplish this doesn't automatically render the play invalid, but it does raise a red flag. Besides volume, Today!
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the astute trader ought to look for a close above the most recent high. This price represents the previous
area of selling pressure and an area where stockholders may be looking to “get out even.” It is Trader Makes
recommended that if volume does not accompany the break, and if the stock fails to make a higher high $4 Billion
within a reasonable amount of time, the trader should move a sell stop up to protect profits. Wiz Kid Stock &
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If the rectangle is large, the expected price movement is approximately equal to the height of the rectangle.
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If the pattern is on the smaller size, then the expected price movement should mirror the price movement
Trading Stock
preceding the pattern.
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On a side note, rectangles are difficult to play. Symmetrical triangles have converging trendlines, and
therefore must break by a certain day. But since rectangles have parallel trendlines – and therefore
theoretically can go on for many months - no time horizon is offered as to when the stock will most likely Technical
break. Analysis
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of the Day.
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http://www.leavittbrothers.com/education/chart_patterns/rectangle_bullish.cfm[3/12/2009 10:50:09 AM]

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CIG was in a solid uptrend with volume to support the strength when it traded into this bullish downward sloping rectangle pattern.
The falling nature of the pattern acts to shake out the weak long positions and cause a little confusion (as evidenced by the lack of
volume in June and July. The stock then breaks out and volume surges. It's not an easy trade because the parallel trendlines don't
offer any clues as to when the stock will breakout, but following other charting tools (like the high volume bullish engulfing pattern
that formed at the bottom of the pattern just before the stock moved up and broke out) will help.
DPH was in steady uptrend when it formed this bullish rectangle pattern. At first the pattern is bullish because the stock is in an
uptrend. If the pattern lasts too long (this is subjective) the momentum would be neutralized. Notice the big volume in late February
and early March. The first price target is measured by the height of the rectangle. The second target is measured by the move into

the pattern.
This is a textbook bullish rectangle pattern. The stock rallied on huge volume in early September. Then the stock traded between
parallel trendlines on much lighter volume, and then the stock broke out on another big volume surge. The quick and violent move
into the pattern was from about 7 to 11, so it is no surprise the move out of the pattern was also quick and violent and from 10 to
14.
» back to top
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Symmetrical Triangles Pennants send to a friend
Ascending Triangles
Rectangles
Pennants Pennants are small continuation patterns that represent brief pauses Morningstar
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within an already existing trend. They are characterized by converging Research
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Head & Shoulder Bottom trendlines and have a definite bullish or bearish bias depending on the 4,000 Stock and
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Bullish pennants typically appear in the middle of large rallies or immediately after a stock has broken out
surprise you. Find
of a basing period.
out now with
Bullish breakouts should be accompanied by a significant increase in volume. Use appropriate stops if this Chart of the Day.
is not seen.
The price action prior to the pennant formation can be used as a guide in predicting the price movement Technical
upon breakout. So, for a bullish pennant in an uptrend to truly possess great potential, it must have been Analysis
preceded by a significant move (i.e. if the movement into the pattern was quick and full of energy, the rally Charts
after the breakout most likely will be quick and full of energy). Charts, analysis,
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The expected price movement upon breakout is approximately equal to the distance of the move into the trading systems
pattern. for US indexes
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http://www.leavittbrothers.com/education/chart_patterns/pennant_bullish.cfm[3/12/2009 10:51:29 AM]

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NWS was steadily trending up when it traded into this 7-week bullish pennant pattern. The volume surge within the pattern is not
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Here is an example of a stock that broke out from a very long basing period and then immediately traded into a bullish pennant.
This scenario happens often. It takes a lot of energy to breakout of the base, so the stock needs to “rest” before continuing its
move up. Notice the volume on both the breakout from the base as well as the breakout from the pennant.

SNIC was a pretty simple play. The stock was in a steady uptrend when it exploded up in late-July. The stock then trended
sideways in a small pennant and then busted out again with another volume surge. Textbook pattern and trade.
FRNT is another example of a stock that broke out of large base on strong volume and then immediately traded into a small
bullish pennant. After its brief rest, the stock then broke out again on another strong volume surge. This action is typical and
somewhat easy to play.
» back to top
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Symmetrical Triangles Flags send to a friend
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Pennants Bullish flags are small continuation patterns that represent brief pauses Stock Market
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The slight short-term downtrend against the overall uptrend is very healthy as it functions to scare off weak
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Whether a bullish flag pattern appears during a large rally or after breaking out of a consolidation period,
Where are
the expected price movement upon breakout is approximately equal to the preceding move into the flag.
stocks
It is important to emphasize that for a bullish flag to truly posses great potential, it must have been headed?
preceded by a significant move on heavy volume. Like pennants, bullish flags tend to be symmetrical in The answer may
that the stock movement after the breakout often mirrors the move into the pattern. surprise you. Find
out now with
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http://www.leavittbrothers.com/education/chart_patterns/flag_bullish.cfm[3/12/2009 12:32:55 PM]

Where are
stocks
headed?
The answer may
surprise you. Find
out now with
Chart of the Day.
AZO formed a textbook bullish flag pattern in 2001. The stock was in a steady uptrend when it popped up on strong volume. It then
traded into a 3+ week bullish flag on lighter volume before busting out on a huge volume surge. This is the exact sequence of
events you want with a bullish flag pattern.
BYD is an example of a stock that broke out of a large basing period and then needed to rest in a bullish flag before continuing its
move up. In this situation you would use the move into the pattern to measure the expected move out of the pattern, but the
massive volume that accompanied the breakout tells you there are a lot of buyers, and you can expect to get a bigger move.

CREAF is another example of a stock that broke out of large basing period, moved up and traded into a bullish flag, and then Technical
busted out again. The move into the pattern (from approx. 4 to 8.5) predicted a move to 12.5 when the stock broke out at 8. Not Analysis
bad, but price targets are only guidelines and should never be blindly adhered to. Sometimes stocks come up short while other Charts
times they blow right through them. Charts, analysis,
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This is not what we would consider an easy trade. Certainly the chart posted here look easy and obvious to play, but notice how Effective Forex
the stock basically giggled in place for a few weeks before busting out. It took a high volume gap up to break out of the pattern, Trading Strategies
and only an active and patient trader would have gotten in the trade. In Less Than 30
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Symmetrical Triangles Wedges send to a friend
Ascending Triangles
Rectangles
Pennants Bullish wedges are small continuation patterns that represent brief pauses
Flags
within an already existing uptrend. They are characterized by converging Decision Point
Wedges
Head & Shoulder Bottom trendlines and have a definite bullish bias. They are similar to bullish Your technical
Cup & Handle pennants except where pennants are generally flat, wedges have a analysis toolbox.
Trendlines
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Bullish wedges typically appear in the middle of a large rally or immediately after a stock has broken out of from the current
a basing period. World Record
Holder in the
Bullish breakouts should be accompanied by a significant increase in volume with appropriate stops used if market.
this is not seen. www.chartpattern.com
The price action prior to a wedge formation can be used as a guide in predicting the price movement upon
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DOVP was in a steady uptrend when it traded into a downward sloping bullish wedge. This pattern is very similar to a bullish
pennant except here both trendlines slant down. Volume popped on the breakout and was then fairly steady during the rally.
URBN traded into a textbook bullish wedge in the spring of '02. Three touches established both support and resistance and

volume surged on the breakout. Pretty simple.
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Symmetrical Triangles Head & Shoulder Bottom send to a friend
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The above chart illustrates the sequence of events that unfold as the pattern develops. The left shoulder is Stock Tips &
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rally from this shallower dip (right shoulder) through the neckline with a volume surge would mark a stocks
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Like all other upside breaks, a surge in volume must accompany the breakout. Failure to accomplish this surprise you. Find
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Head & shoulder bottom patterns rarely fit the textbook description, and ANAD is a good example of that. Typically you'd like the Options!
pattern to be bigger, but in this case the neckline was fairly easy to determine and the volume surge on the breakout sealed the www.VirtualinvestingClub
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and fall off on the left side of the right shoulder. The volume surged when the stock exploded out of the pattern.
Whole numbers are often significant numbers, so when AAPL formed a head & shoulder bottom pattern with its neckline at 20, the
astute trader needs to pay more attention. The move down into the pattern was 5 points (from 25 down to 20) and the size of the
head was 5 points (15 to 20), so the projected move out of the pattern was 5 points (from 20 to 25). We didn't quite get it (probably
because there wasn't much volume on the breakout), but we did get a nice 20% move nevertheless.
» back to top




Symmetrical Triangles Cup & Handle send to a friend
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The above chart illustrates the sequence of events that unfold as the pattern develops. After a nice rally
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The best patterns possess a decent amount of symmetry with the right half of the cup mirroring the left half
and the right half of the handle mirroring the left half. But while it is nice for the pattern to have a smooth
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of the cup. Theoretically, only the selling to satisfy the people who want to get out near the previous high Trading Forex
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The same breakout requirements govern as with other breakouts. Volume must surge to validate the
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GSIC rallied strongly from penny stock land and then formed a nice cup & handle pattern with easily defined resistance. Notice the for US indexes
volume starting to pick up on the right side of the cup and then drop off on the left side of the handle before surging during the
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HEPH also formed a cup & handle pattern while in a steady uptrend. The stock did pull back to test the breakout area, and after
succeeding it began a nice steady climb. It would have been nice to get a big breakout from the get-go, but this isn't rocket science
– patterns don't always work perfectly. As long as the stock stays in its uptrend, there is no reason to exit the trade.
WMAR is another decent cup & handle example. Notice the volume starting to pick up on the right side of the head and then falloff
on the left side of the handle. That is the type of action you want to see.
» back to top




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After gapping down and basing for 5 months with easily defined resistance, DCN broke out on steady volume that lasted well over
a month. Maybe you can call it a head & shoulder pattern with two shoulders on each side…it doesn't matter. The only important
features are the size of the base (5 months) and the volume on the breakout. We got both, so it doesn't matter what you call the
pattern.
AXL was generally trading neutral with easily defined trendline resistance overhead. Until the stock breaks out on volume, there
isn't much to do from a “chart pattern” standpoint other than play the range. But once resistance is taken out on big volume, the
stock become playable to the upside.

CNX is another simple example of a trendline being used to determine entry on a trade. Resistance is formed by a couple touches,
and volume pops on the breakout. Notice how the pricing action on the rally after the breakout is very similar to the pricing action
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IMAX didn't really fit well into the bullish wedge, flag or pennant patterns, but the pattern was too good to ignore. In this case we Shocking Report
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typically diminishes as the pattern develops because traders become more and more unsure as to the
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Bearish symmetrical triangles appear in downtrends and typically resolve themselves to the downside.
Breakdowns do not have the same volume or movement requirements as their opposite upside breaks. In
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BRCM was in a steady downtrend when it traded into this bearish symmetrical triangle. Notice how the volume dropped off
towards the completion of the pattern. That's a sign that temporarily it's an equal battle between the bulls and bears and neither
one is willing to step up and place a bet as to the stock's future movement. Then the stock breaks support and volume ramps up
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TEO formed a decent size symmetrical triangle within a steady downtrend. These patterns typically resolve themselves in the Learn
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Pretty pattern here. Not all bearish symmetrical triangles will setup this nicely. ALSC was in a downtrend...two higher lows formed
support while one lower high formed resistance. Volume dropped off within the pattern and then surged after the break down. The
stock did bounce around between 9 and 10 after the break down, but as a chart pattern trader, as long as the overall market is
leaning weak, that action is nothing to worry about. Give the stock room to run its course.
» back to top




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ADRX formed a very large neutral rectangle pattern in the second half of '02 that could have broken out either way. A good trader
can play the range by buying at support and selling and selling short at resistance. But if this is done, the prudent trader would exit
and go the other way if either support or resistance was penetrated.

ADBE was in an uptrend when it started to meander its way sideways in this neutral rectangle pattern. With 3 touches at
resistance, 5 touches at support, and sporadic volume within the pattern, the stock could have broken either way. A good trader
could play the range while always being ready for a break when one of the trendlines in approached.
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TWR was generally a neutral stock. Although it was in a slight uptrend, the size of the symmetrical triangle neutralizes whatever
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WMS was in a steady uptrend when it traded into this large 6-month symmetrical triangle. The size of the pattern neutralizes the
strong move into the pattern, so the stock simply becomes trendless rather than a strong stock in a steady uptrend. The size of the
pattern was about 10 points, so that is our first expected price move. Once that is accomplised, use the rally into the pattern to
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CTXS was in a downtrend when it traded into this symmetrical triangle. If the pattern lasts a couple months we would consider the
stock to be weak and is a downtrend (and most likely to resolve itself to the downside), but the pattern is big enough to neutralize
the battle between the bulls and bears. The stock did continue the move down, but it could have broke out either way.
DISH was trending sideways for 6 months when it made a series of higher lows and lower highs to form this symmetrical triangle.
Given the neutrality of the pattern, the stock could have broken out either way. Notice how volume fell off towards the end of the
pattern and then ramped up after the break. That's exactly what you want to see.
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The best breakdowns occur ½ to ¾ of the way through the pattern. Breakdowns that are delayed until stocks
prices crowd into the apex usually fail or are mediocre at best. Similar in concept to ascending triangles, if headed?
a stock forming a descending triangle were to trade up through its upper trendline opposite the overall The answer may
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PMCS formed a pretty simple descending triangle pattern. Volume was big into the pattern and the first couple weeks of the
pattern's formation and then fell off noticeably right before support was penetrated. The move we got on the downside was approx.
equal to the size of the triangle, and that is what you can expect as long as the overall market cooperates.

ULCM sold off big time and then traded sideways into a descending triangle pattern. Notice the volume surge on the break and the
steady down volume that lasted several weeks. As an added bonus, it's nice when support is a whole number like 15. That makes
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Here is a good example of volume ramping up after support is penetrated. When the stock first breaks down, stockholders start to Dow Jones 100
get worried and some sell. As the stock continues down, general concern turns to fear which then turns to an outright panic, and Year Chart
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preceding the pattern. Where are
stocks
On a side note, rectangles are difficult to play. Symmetrical triangles have converging trendlines, and headed?
therefore must break by a certain day. But since rectangles have parallel trendlines – and therefore The answer may
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CIMA gapped down on big volume and then traded into a bearish rectangle pattern. These patterns typically resolve themselves in
the direction of the trend which was obviously down. In this situation, traders need to be aware of a possible attempt at filling the
gap, but once support was taken out, the stock couldn't even muster any type of bounce for over a month.
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CVC was in a steady downtrend when it formed this bearish rectangle pattern. The false break down in July serves as example as
to the difficulty in trading such patterns. Unlike triangles which have converging trendlines and therefore must break down by a Force Volume
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Textbook play here. ADIC was weak and then trended sideways between parallel trendlines. Once support was taken out, the
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The price action prior to the pennant formation can be used as a guide in predicting the price movement
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same trading activity when support is taken out. But if the stock slowly meanders its way into the pattern,
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Here's an example of a stock forming a bearish pennant immediately after breaking a longer term support trendline. This happen
often as the stock is still generally in an uptrend when the first break occurs and some amateur traders recognize what they think is
a buying opportunity. But the pros are unloading and when buying from the public dries up, the bottom falls out.
Here's is another example of a stock trading into a bearish pennant soon after a longer term uptrend was broken. Notice volume
on the initial break was simply average, but the next day was a blood bath. This happens often…a delayed volume surge.

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MCD traded into a bearish pennant while in a downtrend. The trendlines are easy to draw which is a bonus. Notice how volume Analysis
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PXLW is another example of how volume typically ramps up after a stock breaks down. Year Chart
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IDPH was rolling along when it formed this bearish flag pattern. Notice how volume ramped up into the pattern and then fell off
within the pattern. It then picked up again with support was taken out. This is the type of volume action you want to see to confirm
the price moves.
KLIC is an example of a stock that formed a bearish flag pattern after having broken a longer term support line. You can see how
volume dried up within the pattern and then got huge during and after the breakdown.

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PCSA is another example of a stock that formed a bearish flag immediately after breaking down from a larger pattern. Volume was Analysis
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HGSI is very similar to the IDPH pattern above. The stock was gently rolling along in a downtrend when if formed a bearish flag Strategy?
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CPRT is a good example of a stock that traded into a upward sloping bearish wedge while being in a pretty ugly downtrend. Notice
how volume dropped off while the stock traded up within the pattern. That's a dead give-away that lower prices will follow.
SGR got crushed in the early months of 2003 and then slowly traded into a bearish wedge pattern. Unlike a bearish rectangle

which has parallel trendlines and offers no clues as to when the stock may break down, the converging trendlines with a wedge
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The stock then rallies again but is unable to eclipse its previous high. This is the second sign the uptrend
may be nearing an end. A sell-off from this shorter peak (right shoulder) through the neckline would mark a Where are
successful reversal of the uptrend. stocks
headed?
There is a tendency for a head & shoulders to develop a high degree of symmetry. This is amazing The answer may
considering all the news and events and “things” that can influence a stock's price on a day-to-day basis. surprise you. Find
Some traders demand symmetry and only consider the pattern valid if the two shoulders are equal in size out now with
and duration. However, although this is desired and the pattern may have a very satisfying balance, it is Chart of the Day.
not necessary. A perfectly symmetrical head & shoulders pattern doesn't happen often. There usually is
some distortion or variation (such as the formation of a second right shoulder) in the pattern, and since
chart reading is an art, there will always remain a subjective human aspect to the analysis.
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volume followed by the stock drifting lower for a few days on increasing volume. Psychologically, when a
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The character and extent of the expected price movement upon breakage depends on several factors. World Record
Typically it is equal to the distance from the neckline to the extreme point of the head. But this is just a Holder in the
guideline. Head and shoulders is a reversal pattern, so there must be a significant move to reverse. A market.
small move into the pattern usually results in a small drop upon break. Also, the drop tends to be the
mirror image of the preceding rally. This means a quick rally full of energy foreshadows a quick drop.
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Whether a stock bounces back to the neckline after breaking support can depend on the overall market. If Today!
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the entire market is weak, there probably will be no bounce. If on the other hand the market is trending up
http://www.leavittbrothers.com/education/chart_patterns/head_and_shoulder_bearish.cfm[3/12/2009 1:45:13 PM]

at the same time a stock completes its pattern, then a bounce is likely.
Where are
A Head & shoulders top that breaks through its neckline almost always experiences a significant drop; a stocks
headed?
failed head & shoulders top is almost never the beginning of a large rally. However, the stock, which now
The answer may
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This is not what we would consider a textbook head & shoulder top pattern, but the neckline was easy to define, so it was playable Options!
anyways. Ideally you'd like to see volume pick up a little more on the right side of the head. That would indicate sellers are starting
to step up.
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DIGL traded into a small head & shoulder top pattern after having rallied from just over 10 to up near 60. Notice the bounce in late
June. After breaking down on big volume the stock rallies back up near the neckline before being rejected and heading back
down. The stock wasn't just playable on the violation of support but also on the failed bounce attempt to “support turned
resistance.”
OII formed a head & shoulder top pattern during the summer of '02. The move down after the neckline was penetrated was
prefectly projected by the "height" of the head.
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These trendlines shall be played the same as the continuation patterns
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Bearish Patterns
break because a delayed volume surge is preferable, and the pricing Stock Market
Symmetrical Triangles action after the break should mirror the move into the pattern. Winners
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Flags out. A large pattern indicates many stock holders would be showing a World Record
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Trendlines
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not have a volume requirement. As with other bearish breaks, often there www.chartpattern.com
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Don't be fooled here – not all trendline breaks work this well. But it does go to show you what can happen. When PCS traded
below the June low, every single trader/investor who bought the stock in the previous 9 months was showing a loss. As the stock
dropped and more and more stockholders became frustrated, fear turned to panic and the stock completely collapsed when
everyone tried to run for the exit.
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ARW was in a steady downtrend and then traded sideways with resistance established at 15. The pattern trading action didn't
exactly fit any of our “canned” patterns discussed in this section, but it was still playable when support was taken out…just a simple
continuation pattern.

EXTR formed a large pattern that neutralized whatever downside momentum existed when the stock finally started trading
sideways in March. The stock could have broken either way, but in this case, once support was taken out, volume ramped up and www.dotnetcharting.com
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Candlestick Patterns
A single day's trading activity can be summarized in a "candle." Groups of candles or certain candlestick
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Three Line Strike Where are
Three Outside Up
The Psychology stocks
Three Stars In the South
Three While Soldiers In a downtrend or within a pullback of an uptrend, the market gaps down but does not continue its headed?
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Unique Three River Bottom surprise you. Find
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Upside Tasuki Gap confirmed by the next day's gap up and rally. out now with
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The bullish Abandoned Baby formation doesn't occur too often and is similar to the bullish Doji Star, bullish
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GENZ fell and churned along the 20 level to establish support. It then formed a bullish Abandon Baby pattern which began its
reversal of the downtrend. If this pattern formed as the first set of candles at 20, it is less likely a reversal could have immediately
occurred, but since the Abandon Baby formed after the stock was able to establish support, the play to the long side became more
reliable.
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A white day occurs with no lower shadow and a close near the day’s high.
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Three Line Strike The Psychology Filer Latency
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The Belt Hold occurs fairly often and is not very reliable. The fact that the day’s opening price holds as the Monitoring
Three While Soldiers low of the day and the stock trends up all day leans bullish, but one really needs to make note of the Powerful indepth
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COT was in a nice uptrend when it pulled back to support on declining volume. The Belt Hold candle was playable on the long side
because it occurred at support and at 20 (a nice whole number). This candle is much more reliable if played within an uptrend
rather than at the end of a downtrend.
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A Doji forms at the upper end of the trading range with a long lower shadow (the longer the more bullish).
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In a downtrend or within a pullback of an uptrend, a sharp intraday sell-off is followed by a reversal which Decision Point
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BBBY also formed a bullish Engulfing pattern at a level that had previously been established as support. This is what we mean
when we say this pattern is better played on a pullback within an uptrend rather than at the end of a down trend.
CSCO was trending up when it pause for a few days. It then formed a bullish Engulfing pattern as a continuation of the uptrend.
JNJ bounced around in volatile fashion and then established short term support at around 49. After a few days of churning, the
stock formed a bullish Engulfing pattern that started a leg up. If this pattern would have formed as the first set of candles at 49, it is
less likely the stock would have reverse, but because the stock churned around for a few days, the pattern became much more
reliable.
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Abandoned Baby
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A Doji forms at the lower end of the trading range. The upper shadow is usually long while the lower
Three Inside Up shadow is small or almost nonexistent.
Three Line Strike
Three Outside Up Where are stocks
The Psychology
Three Stars In the South headed?
Three While Soldiers In a downtrend or during a pullback within an uptrend, the stock gaps down. A valid attempt is made to The answer may
Tri Star
rally the stock off the bottom, but the strength subsides and the stock falls to close near the day’s low at surprise you. Find
Upside Gap Three Methods the same price it opened. The rally attempt failed, but it does suggest that there are some bulls out there out now with Chart
Upside Tasuki Gap looking to buy. For a reversal to occur a strong follow up day is needed with solid volume. of the Day.
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The bullish Gravestone Doji is similar to the bullish Inverted Hammer, bearish Shooting Star, and bearish
Gravestone Doji.
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Here's a good example of playing what is considered a reversal candle….in a continuation scenario. GNTX was steady trending up
when it pulled back on declining volume to an area that had previously been established as possible support. It then formed a
bullish Gravestone Doji candle, and this started the reversal of the move down (but we actually consider it to be a continuation of
the move up).
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Breakaway
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Harami
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Mat Hold
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Morning Star Reliability: low/moderate Micro lots, tight
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A small real body forms at the upper end of a trading range with a long lower shadow (the longer the more
Three Inside Up bullish) with no, or almost no upper shadow.
Three Outside Up
The Psychology Candlesticks?
Three While Soldiers In a downtrend or within a pullback of an uptrend, a sharp intraday sell-off is followed by a reversal which Don't Take
Tri Star causes the stock to close near its opening price near the day’s high. This hints at the possibility of a Another Forex
Upside Gap Three Methods reversal. Bulls most likely were shaken out by the intraday weakness, and shorts start getting a little
Upside Tasuki Gap worried with the bounce. The pattern is a slightly more reliable if the real body is white, but a strong Read This
following day on solid volume is still needed to confirm the pattern. Shocking Report
The bullish Hammer is similar to the bullish Dragonfly Doji, bearish Hanging Man, and bearish Dragonfly Company
Doji. Stock
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CCK rallied nicely off its early May low on seven consecutive up days. The stock then pulled back to establish a possible short
term support level. The bullish Hammer candle that formed a few weeks later was playable to the upside when confirmation was
given by the white candle that followed.
NKE suffered a pretty drastic sell off in February '00. In our opinion a bullish Hammer candle in late Feb would not have been
playable…too risky. But two weeks later after the down trend had been halted, the bullish Hammer presented a favorable
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SUP is another example of waiting for a stock to establish support before playing a reversal. Playing the first Hammer candle hand tools in
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Breakaway
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Harami
Harami Cross
Homing Pigeon
Inverted Hammer
Ladder Bottom
Mat Hold
Hosting
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Morning Star Reliability: low Micro lots, tight
Stick Sandwich
A long black day is followed by a white day which gaps opposite the trend and is completely engulfed by
Three Inside Up the real body of the first day. Ø¬Ù‰ ØªÙ‰ Ø
Three Line Strike ¢ÙŠÙ„ ÙØ¤Ø
Three Outside Up
The Psychology ±ÙƒØ³
Three While Soldiers In a downtrend or within a pullback of an uptrend, a long black day occurs. The next day’s gap up comes Ø£ÙŠ
Tri Star as a surprise to the shorts who thought they were sitting on a great position the previous day. Reliability of Ù„Ø¬Ù†Ø©. Ù„Ø§
Upside Gap Three Methods the bullish Harami is low, so a strong following day is needed for confirmation. Ù…ØµÙ„ØØ©
Upside Tasuki Gap Ù„Ù„.400:1
The bullish Harami is similar to the bullish Homing Pigeon and could be the first two days of the bullish Ø§Ù„Ù†ÙÙˆØ°.
Three Inside Up pattern. Ø¨Ø¯Ø¡ ØØ³Ø§Ø¨
Ø¹Ù Ù ÙŠØ§
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ACAS made a higher high in late April and that level then became support a few weeks later. A bullish Harami candle formed and
the stock never did trade below that level. This is where we like to play Harami candles…at support, not at the end of a
downtrend.
ATSI was trading in a bullish triangle pattern and was getting close to decision time because the stock was near the apex of the
pattern. The bullish Harami signaled the beginning of the breakout and next leg up.
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The bullish Harami that formed here with GMH carried a little more risk because it did not occur at support. But the high volume $18 Billion
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Harami
Harami Cross
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Inverted Hammer
Kicking
Trade MT4-
Matching Low
Morning Star Reliability: low any OS - MAC or
Piercing Line
Stick Sandwich
A long black day is followed by a Doji which gaps opposite the trend and is completely engulfed by the real
Three Inside Up body of the first day.
Three Outside Up
Three While Soldiers In a downtrend or within a pullback of an uptrend, a long black day occurs. The next day’s gap up comes Don't Take
Tri Star as a surprise to the shorts who thought they were sitting on a great position the previous day. The stock Another Forex
Upside Gap Three Methods closes where it opens to signify a churn day with neither the bulls nor bears showing much force after the
Upside Tasuki Gap opening gap up. Reliability of the bullish Harami Cross is low, so a strong following day is needed for Read This
confirmation. Shocking Report
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Here is an example of a stock forming bullish reversal candle at support…the most reliable place to appear. Your risk/reward is
heavily in your favor if you play a Harami Cross at support rather than at what you think might be the end of a downtrend.
POOL presents anther desirable place to play a Harami Cross. The stock was in a steady uptrend and simply pulled back to the
longer term support trendline and formed the bullish reversal (we consider it a continuation) candle. The white candle that follows is
your entry.
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Breakaway
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Harami
Harami Cross
Homing Pigeon
Inverted Hammer
Ladder Bottom
Mat Hold
Hosting
Meeting Lines
Morning Star Reliability: moderate Micro lots, tight
Stick Sandwich
A long black day is followed by another black day which gaps opposite the trend and is completely
Three Inside Up engulfed by the real body of the first day.
Three Outside Up
Three While Soldiers In a downtrend or within a pullback of an uptrend, a long black day occurs. The next day’s gap up comes headed?
Tri Star as a surprise to the shorts who thought they were sitting on a great position the previous day, but the stock The answer may
Upside Gap Three Methods gives some of its gap up back causing the candle to be filled in. This relaxes the bears and worries the
Upside Tasuki Gap bulls, and this is the exact recipe needed for a possible bounce. Confirmation is needed with a strong out now with
following day on solid volume. Chart of the Day.
The bullish Homing Pigeon is similar to the bullish Harami and bullish Matching Low.
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This isn't a great example of a bullish Homing Pigeon, but it at least gives the reader a glimpse at one may look like. MDG was a
fairly weak stock, so buying this pattern was risky. In hindsight it turned out to be support, but hindsight is always 20/20.
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A small real body forms at the lower end of the trading range. The upper shadow is usually no more than
Three Inside Up twice as long as the real body and there is no or almost no lower shadow.
Three Outside Up
Three While Soldiers In a downtrend or during a pullback within an uptrend, the stock gaps down. A valid attempt is made to headed?
Tri Star rally the stock off the bottom, but the strength subsides and the stock falls to close near the day’s low. The The answer may
Upside Gap Three Methods rally attempt failed, but it does suggest that there are some bulls out there looking to buy. For a reversal to
Upside Tasuki Gap occur a strong follow up day is needed with solid volume. out now with
Chart of the Day.
The bullish Inverted Hammer is similar to the bearish Shooting Star, bullish Gravestone Doji, and bearish
Gravestone Doji and could become the middle day of the bullish Morning Star.
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Kicking send to a friend

Breakaway
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Harami
Harami Cross
Homing Pigeon
Inverted Hammer
Ladder Bottom
Mat Hold
Hosting
Meeting Lines
Stick Sandwich
A Black Marubuzo (open is the high of the day and the close is the low of the day) day is followed by a
Three Inside Up White Marubuzo (open is the low of the day and the close is the high of the day) day that gaps in the
Three Line Strike opposite direction. Stock
Three Outside Up
Three Stars In the South Performance
Three While Soldiers The Psychology Get Stock
Tri Star The current trend is not very important with a bullish Kicking pattern. The fact that the stock can gap up and Research and
Upside Gap Three Methods rally to close at its high is bullish regardless of the previous trend. Use volume on the white day to confirm Reports from
Upside Tasuki Gap the movement. Morningstar.com
Morningstar.com/Stocks
The bullish Kicking is similar to the bullish Separating Lines.
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Three black days occur with successive lower opens and lower closes. Then a black day forms with some
Three Inside Up noticeably upper shadow. The final day is a white day that gaps against the trend and opens above the
Three Line Strike body of the fourth day.
Three Outside Up Stock Market
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Tri Star In a downtrend or during a pullback within an uptrend, the bears are certainly in control. The buying that Stock Research
Upside Gap Three Methods takes place on the forth day that forms the long upper shadow hints at buyers starting to bottom fish and Reports with Buy
Upside Tasuki Gap shorts possibly taking some profits, but the intraday sell-off that closes the stock at the lows likely wipes out & Sell Prices
www.Morningstar.com
the bulls, and with the lack of sellers available, there isn’t much resistance left when the shorts start to
cover.
The bullish Ladder Bottom is similar to the bullish Concealing Baby Swallow and bearish Three Black Forex
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Mat Hold send to a friend
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A long white day in an uptrend is followed by a relatively small black day that gaps in the direction of the
Three Inside Up trend. The next two days continue the brief pullback and are small days that stay within the range of the
first day. The fifth day is a long white day that closes above the close of the first day and continues the
Three Outside Up Candlesticks?
Three Stars In the South uptrend.
Three While Soldiers
Don't Take
Tri Star The Psychology Another Forex
Upside Gap Three Methods In an uptrend, a long white day is followed by a brief pullback (preferably on lightish volume). The fifth day
Upside Tasuki Gap simply continues the trend. The brief pullback is nothing more than a few days off for the bulls. Read This
Shocking Report
The bullish Mat Hold is similar to the bullish Rising Three Methods.
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A long black day is followed by another black day with equivalent closes both days.
Three Inside Up
Three Line Strike The Psychology Futures &
Three Outside Up
In a downtrend or during a pullback within an uptrend, a long black day occurs signaling the bears being in Options Data
Three While Soldiers control. The stock gaps up the next day but then sells off to close at the same level as the previous day. Quotes, Charts,
Tri Star The more times a stock can successfully test and hold a low, the higher the chance a reversal will occur
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Upside Gap Three Methods once the seller become exhausted. Strength the following day with volume would confirm the pattern. Commodity Paper
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Here is a great place to go long a bullish Matching Low formation. In a steady uptrend, TNE pulled back and formed the pattern
right at a previous support area.
NEM was slowly moving up when it formed a bulling Matching Low pattern. The stock immediately moved higher (probably
coincidental) and continued its move up.
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A long black day is followed by a long white day that gaps in the direction of the trend but then rallies to
Three Inside Up close at the same price as the black day’s close. Company
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Three Outside Up
The Psychology Research
Three While Soldiers In a downtrend or during a pullback within an uptrend, a long black day occurs. The next day gaps down in 2,000 Stock
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Harami
Harami Cross
Homing Pigeon
Inverted Hammer
Ladder Bottom
Mat Hold
Hosting
Meeting Lines
Stick Sandwich
A long black day is followed by a Doji that gaps in the direction of the trend. The third day is a white day
Three Inside Up which closes in the top half of the black day.
Three Outside Up
Three While Soldiers In a downtrend or during a pullback within an uptrend, the market gaps down but does not continue its headed?
Tri Star downward movement. Instead enough bulls step up to bring supply and demand back into equilibrium and The answer may
Upside Gap Three Methods the stock churns in place. This is the bullish Doji Star formation. A subsequent follow through gap up that
Upside Tasuki Gap closes above the midpoint of the black day completes the Morning Doji Star and confirms the reversal. out now with
Chart of the Day.
The bullish Morning Doji Star is similar to the bullish Abandoned Baby and bullish Morning Star.
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AMH rallied nicely on solid volume before trending sideways and establishing support at around 27. Then a bullish Morning Doji
Star formed, volume picked up, and the stock continued to move up. Although Morning Doji Star formations are considered
reversal patterns, their reliability increases significantly if you play them at support.
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A long black day is followed by a small day that gaps in the direction of the trend. The third day is a white
Three Inside Up day which closes in the top half of the black day. Company
Three Outside Up
Three While Soldiers In a downtrend or during a pullback within an uptrend, the market gaps down but enough buyers step in to 2,000 Stock
Tri Star halt the weakness. The lack of ability of the bears to press the issue indicates the downtrend may be
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The bullish Morning Star is similar to the bullish Morning Doji Star, bullish Abandoned Baby, and bullish www.Morningstar.com
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Here is a great example of an ideal entry place with a Morning Star formation. ASML was in a steady uptrend when the stock fell
back to a longer term support trendline in late June. The bullish Morning Star pattern presented a low risk/high reward setup just
the same as the bullish Engulfing pattern on May 27 offered.
A bullish Morning Star formation also presented a good entry with DRCO. The stock was in a nice uptrend when it established and
then bounced off support in June. These candlestick patterns don't always work, but if you patiently wait for your ideal entries, the
odds significantly shift in your favor.
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A long black day is followed by a white day that gaps below the black day’s low and closes within and
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Three While Soldiers In a downtrend or during a pullback within an uptrend, the stock gaps down, finds some buyers and then EA hosting,
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The bullish Piercing Line is similar to bearish On Neck, bearish In Neck, bearish Thrusting, bullish PC
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GE was trending sideways with well established support. Although bullish Piercing Line candles are considered reversal patterns,
we think the reliability of the candle increases if played at support as shown here.
GM formed a Piercing Line candle formation at support, and that started the next leg up. How far it goes is unknown when the
pattern forms. All you can do is play it and move stops according to the pricing action. In this case it turned out to be a good one.
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Like the other examples, AMZN formed a bullish Piercing Line formation right at support, and that started a better than 30% move
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Stick Sandwich
A long white day in an uptrend is followed by three relatively small candles that move opposite the overall
Three Inside Up trend but stay within the range of the first day. The fifth day is a long white day that closes above the close
of the first day and continues the uptrend.
Three Outside Up stocks
Three While Soldiers The Psychology headed?
Tri Star In an uptrend, a long white day is followed by a brief pullback (preferably on lightish volume). The fifth day The answer may
Upside Gap Three Methods simply continues the trend. The brief pullback is nothing more than a few days off for the bulls.
Upside Tasuki Gap out now with
The bullish Rising Three Methods is similar to the bullish Mat Hold. Chart of the Day.
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Some of these candlestick patterns don't form too often. We tried hard to find a Rising Three Methods formation but have failed so
far. So we are using a Rising “two” Methods to serve as an example. Note the move up in early June got close to 80 but was
rejected. Then the 80 level was solidified as being noteworthy when the stock traded above and below the level for 6 consecutive
days later in the month. It should then come as no surprise that the Rising Methods formed and used 80 as support before moving
up.
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A black day is followed by a white day that has the same opening price.
Three Inside Up Company
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Three Outside Up
In an uptrend, the underlying issue gaps up and falls to produce a black day. This proves to be simple Research
Three While Soldiers profit taking within the uptrend when the issue gaps up the next day and rallies to close near its high. 2,000 Stock
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A white day is followed by another white day that gaps in the direction of the trend. The third candle is also
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Three While Soldiers In an uptrend the second white candle that gaps up could signify the last of the bulls getting in “at any EA hosting,
Tri Star price.” The gap down the next day could be the start of a pullback, but since the stock rallies again, the customizable
Upside Gap Three Methods bulls obviously are not done yet. As a continuation pattern, this formation hints at more upside to come.
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A black day is followed by white day that gaps against the downtrend and closes above the black day’s
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The Psychology ±ÙƒØ³
Three While Soldiers After two consecutive higher opens, the stock is right back where it started. One can sense the stock wants Ø£ÙŠ
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Breakaway
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Trade MT4-
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A bullish Harami pattern is followed by a white day that has a higher close than the second day.
Three Inside Up
Three Outside Up
In a downtrend or during a pullback within an uptrend, a bullish Harami pattern forms. This pattern has low Decision Point
Three While Soldiers reliability, but when it is followed up with another white day, a reversal becomes much more probable – Your technical
Tri Star especially when accompanied by volume. analysis toolbox.
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If bullish Harami candles have high reliability when played at support then bullish Three Inside Up formations have very high
reliability. Here is an example. BNN/A.TO (Canadian stock) traded down to 33 – a level that had previously been established as
significant. The stock then formed a bullish Three Inside Up pattern that then started the next leg up.
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Three long white days with consecutively higher closes are followed by a fourth day that gaps open in the
Three Inside Up direction of the trend and closes below the open of the first day.
Three Outside Up
Three While Soldiers In an uptrend the Three Line Strike pattern has low reliability. The large black day can really scare the bulls headed?
Tri Star and many contrarians will cite this as bullish. If indeed the uptrend is strong, the one black day should not The answer may
Upside Gap Three Methods ruin the pattern. Hence, if the next day is up, the uptrend should continue.
Upside Tasuki Gap out now with
The bullish Three Line Strike is a possible continuation of the bullish Three White Soldiers. Chart of the Day.
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A bullish Engulfing pattern is followed by a white day whose close is higher than the second day.
Three Inside Up
Three Line Strike The Psychology Trade MT4-
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In a downtrend or during a pullback within an uptrend, a bullish Engulfing pattern forms. By itself the Regulated Firm
Three While Soldiers pattern has moderate reliability as a reversal indicator, but when the it is followed by another white day EA hosting,
Tri Star (preferably on strong volume), the overall pattern becomes much more reliable. customizable
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Dow Jones 30
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Since bullish Engulfing patterns have decent reliability when played at support, Three Outside Up formations have high reliability beginning of a
when they form in the same situation. Here, FMXI rallied and then gave back about 50% of its gains. The stock then formed a long crossover
bullish Engulfing pattern and followed it up with a another up day to complete the Three Outside Up pattern, and the stock bottom. View now
proceeded to bounce over 30% in just one week. for free
Here is another example of the high reliability bullish Three Outside Up pattern forming at a level that was previously established
as support. Note the volume surges.
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TEVA was bouncing around in pretty volatile fashion when it formed a bullish Three Outside Up pattern which ended the Analysis
consolidation period and began the next leg up for the stock. Charts
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A long black day with a long lower shadow is followed by a similar but smaller black day whose lower
Three Inside Up shadow is shallower than the first day. The third day is a small Black Marubozu (open is the high of the day
Three Line Strike The Truth
and the close is the low of the day) that lies within the second day’s trading range.
Three Outside Up About Forex
Three While Soldiers The Psychology Don't Take
Tri Star Three Stars in the South is a bottoming pattern. Each of the successive black candles is slightly less Another Forex
Upside Gap Three Methods bearish that the previous one, so the trend is slowly weakening. As long as the low of the first candle is
Upside Tasuki Gap held, and a white candle on volume can form soon after, a reversal may be in the works. Read This
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The bullish Three Stars in the South is similar to the bearish Three Black Crows. ForexCandlesticksMadeE
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Three long white days occur with each successive open being within the body of the previous day and
Three Inside Up each successive close being higher than the previous day and near the day’s high.
Three Outside Up
In a downtrend or during a pullback within an uptrend, the three long white candles speak for themselves. If headed?
Three While Soldiers
Tri Star volume accompanies the move, the reliability of the pattern increases significantly. The answer may
Upside Tasuki Gap The bullish Three White Soldiers is similar to the bearish Advance Block and bearish Deliberation and out now with
could be the beginning of the bullish Three Line Strike. Chart of the Day.
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Here is an example of a bullish Three White Soldiers formation that formed well into CP's uptrend. I personally think it's a little late
to chase the stock, so this merely serves as an example of what this pattern looks like.
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Dojis occur on three consecutive trading days with the second gapping down and the third gapping back up.
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In a downtrend or during a pullback within an uptrend, a battle begins. The bears start to back off while the Stock Market
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The first day is a long black day, followed by a Homing Pigeon whose lower shadow makes a new low. The
Three Inside Up last day is small and white, and closes below the second day’s close.
Three Outside Up
Three While Soldiers In a downtrend or during a pullback within an uptrend, a black day occurs. The second black day that has a Don't Take
Tri Star long lower black shadow indicates the possibility of an intraday washout of the bulls. Since the third day Another Forex
Upside Gap Three Methods gaps down, the bears are still thought to be somewhat in control, but the higher close (inability of the bears
Upside Tasuki Gap to push the stock down) suggests the bearish tone may be changing. Read This
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Breakaway
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Morning Doji Star Pattern: continuation
Charting stocks,
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A long white day is followed by a second long white day that gaps in the direction of the trend. The third
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Here's an example of a bullish Upside Gap Three Methods formation as a continuation pattern. After breaking out of a base, CLSR
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DIS was in a steady uptrend when it formed a bullish Upside Tasuki Gap formation. Notice the large volume on the up days
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ATW formed a sloppy bullish Upside Tasuki Gap pattern at the same time it broke resistance. The trade was to play the breakout,
but if you missed it, you could go long when support held at 24.5.
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A long white day is followed by a Doji that gaps in the direction of the trend. Then a black day occurs
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If you can handle the volatility, DAL provided a decent entry on a short when the stock formed a bearish Abandoned Baby
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Three white days occur. Each successive day opens within the body of the previous day and closes above
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This bearish Advanced Block pattern which formed at a previous high wasn't going to signal the end of the uptrend and beginning trading systems
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short term traders. neural networks
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A black day occurs with no upper shadow and a close near the day's low.
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A long white day is followed by a white day that gaps above the first day. The next two days continue in the
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Dark Cloud formations are thought to be of the reversal variety but we also think they are playable on bounces within steady
downtrends. CL was falling steadily and bounced on less than impressive volume. The Dark Cloud Cover formation signaled the
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Here is an example of a Dark Cloud Cover candle formation occurring at resistance. In a steady uptrend, playing this pattern for a
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WEDC formed a bearish Dark Cloud Cover candle right at a previous high and began a tradable leg down. When this candle forms
at resistance, your risk declines on a the short side.
After rallying nicely FRED pulled back and then formed a bearish Dark Cloud Cover at the top of the subsequent bounce. But
realistically, given the strenght of the stock, you could not expect the stock to trade below the previous low. Active traders could
sell a long when the candle forms and then look to rebuy when support holds.
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A long white day is followed by a second long white day that closes higher than the first. The third white
Side By Side White Lines day gaps above the second and becomes a white spinning top or Doji.
Three Black Crows The Truth
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Three Outside Down The first two white days say “full speed ahead” as the stock appears strong and in a solid uptrend. But the Don't Take
Thrusting gap up and failure to rally much suggests that the strength may be waning. This isn't necessarily bearish, Another Forex
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The bearish Deliberation is similar to the bullish Three White Soldiers and bearish Advance Block and Shocking Report
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Deliberation formations are not for the light of heart because you are essentially shorting a strong stock. Here you can see AT&T
rally strongly on high volume. The third white day (which was small) hinted that the buyers may be getting tired. A good trader
would wait until the next day to short the gap down at the open…or the pattern could simply be used as an exit strategy for an
existing long position.
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Again, it's hard to short a stock as strong as VXGN was in this bearish Deliberation pattern, but its formation could offer an exit
strategy if you are long.
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A long white day is followed by a Doji that gaps in the direction of the trend. The shadows of the Doji
Side By Side White Lines should not be long.
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, the market gaps up but does not continue its upward Don't Take
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The bearish Doji Star could be the first two days of the bearish Evening Doji Star or the bearish Abandoned
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A Doji forms at the upper end of a trading range with a long lower shadow (the longer the more bearish)
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Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, a sharp intraday sell-off is followed by a reversal which headed?
Thrusting causes the stock to close at its opening price near the day's high. Although the stock recovers from its The answer may
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The bearish Dragonfly Doji is similar to the bearish Hanging Man, bullish Dragonfly Doji, and bullish
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A long black day is followed by a second long black day that gaps in the direction of the trend. The third
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APD was going nowhere when if formed a bearish Downside Gap Three Methods pattern. Essentially the stock was trying to
bounce prior to hitting support, but that obviously didn't happen. If you were short and the white day occurs on light volume as it
did here, there is no reason to cover just yet. But when the stock falls to support, then you better be ready to cover is the stock
bounces.
TNE pulled back from resistance and formed a bearish Downside Gap Three Methods pattern while attempting to move up again.
After one more attempt on less than average volume, resistance held and the stock fell. Once again, don't blindly trade these
candle formations in a vacuum. Make sure you check out the longer term charts and the overall market.
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Downside Tasuki Gap send to a friend
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A long black day is followed by a second long black day that gaps in the direction of the trend. The third
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Three Line Strike
The Psychology
Three Outside Down In a downtrend a gap is partially filled. This is simply a profit taking scenario for the shorts and a sucker
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The bearish Downside Tasuke Gap is similar to the bearish Downside Gap Three Methods.
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I wouldn't exactly say this is a good example of a Downside Tasuki Gap candle because I'd put it in the category of candle
formations that form by happenstance. ANF was going nowhere with no clear trend, but nevertheless it does give the reader a
glimpse at was this type of pattern could look like.
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Engulfing send to a friend
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A white day is then completely “engulfed” by a large black day which gaps above the white day's high and
Side By Side White Lines closes below its low. Company
Three Black Crows Stock
Three Inside Down
Three Line Strike
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Light a Votive
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Having a Votive
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Like many reversal patterns, the bearish Engulfing pattern is better played at resistance rather than blindly in an uptrend. In the beeswax candles
chart above, HL tried hard to move up but the 7 area was too much to handle. Twice the stock formed a bearish Engulfing candle, and more.
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NKE formed a bearish Engulfing pattern at an area of a previous resistance point. The stock then broke support to confirm the
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DRD formed a bearish Engulfing pattern and broke support on the same day…a nice one-two punch.
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Evening Doji Star send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
In Neck Reliability: high
Kicking
Meeting Lines
Separating Lines
Shooting Star
A long white day is followed by a Doji that gaps in the direction of the trend. The third day is a black day
Side By Side White Lines that closes in the bottom half of the white candle.
Three Black Crows
Three Inside Down
Three Line Strike
The Psychology
Three Outside Down In an uptrend or within a bounce of a downtrend, the market gaps up but does not continue its upward
Thrusting movement. Instead enough bears step up to bring supply and demand back into equilibrium and the stock
Tri Star
Two Crows churns in place. This is the bearish Doji Star formation. A subsequent follow through gap down that closes
Upside Gap Two Crows below the midpoint of the white day completes the pattern and confirms the reversal.
The bearish Evening Doji Star is similar to the bearish Doji Star, bearish Evening Star, and bearish
Abandoned Baby.
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We consider this to be a risky trade. ET was rallying on strong volume when it formed a bearish Evening Doji Star formation that Picks Free 14 Day
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Evening Star send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
Kicking
Meeting Lines
Separating Lines
Shooting Star
A long white day is followed by a small body that gaps in the direction of the trend. The third day is a black
Side By Side White Lines day that closes in the bottom half of the white candle.
Three Black Crows
Three Inside Down
Three Line Strike
The Psychology
Three Outside Down In an uptrend or within a bounce of a downtrend, the market gaps up but does not continue its upward
Thrusting movement. Instead enough bears step up to bring supply and demand back into equilibrium so a small
Tri Star
Two Crows body forms. A subsequent follow through gap down that closes below the midpoint of the white day
Upside Gap Two Crows completes the pattern and confirms the reversal.
The bearish Evening Star is similar to the bearish Evening Doji Star, bearish Abandoned Baby, bearish Doji
Star, bearish Two Crows, and bearish Upside Gap Two Crows.
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GFF was in a steady uptrend when it formed an Evening Star pattern at an area that was previously established as possible using advanced
resistance. Coupled with confirmation from one or two technical indicators, this reversal pattern is very reliable – especially when it neural networks
forms at a previous high.
JNJ bounced nicely off 49, but the area of the previous reaction highs were too much to overcome and the bearish Evening Star
pattern suggested a reversal was likely.
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Fallling Three Methods send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
Identical Three Crows Pattern: continuation
Kicking
Meeting Lines
Separating Lines
Shooting Star
A long black day in a downtrend is followed by three relatively small candles that move opposite the overall
Side By Side White Lines trend but stay within the range of the first day. The fifth day is a long black day that closes below the close
Three Black Crows of the first day and continues the downtrend.
Three Inside Down
Three Line Strike
Three Outside Down The Psychology
Thrusting In a downtrend, a long black day is followed by a brief bounce (preferably on lightish volume). The fifth day
Tri Star
Two Crows simply continues the trend. The brief bounce is nothing more than a few days off for the bears.
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Identical Three Crows Pattern: reversal surprise you. Find
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Separating Lines
Shooting Star
A Doji forms at the lower end of the trading range. The upper shadow is usually long while the lower
Side By Side White Lines shadow is small or almost nonexistent.
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, the stock gaps up. A valid attempt is made to rally the Don't Take
Thrusting stock, but the strength subsides and the stock falls to close near the day's low at the same price it opened. Another Forex
Two Crows Failure to follow through with strength suggests the bulls may be losing strength. Although this is not
Upside Gap Two Crows necessarily extremely bearish, it is less bullish, so stops should be moved up or profits taken on longs. For Read This
a reversal to occur a weak day is needed to confirm the pattern. Shocking Report
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Here is an example of using a Gravestone Doji as a reason to exit a long position – but not to enter a short. The stock is simply too for US indexes
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Hanging Man send to a friend
Where are
Abandoned Baby
Belt Hold headed?
Breakaway
Doji Star
Dragonfly Doji
out now with
Engulfing
Evening Doji Star
Gravestone Doji
Hanging Man
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Harami 2,000 Stock
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Meeting Lines
Shooting Star
A small real body forms at the upper end of the trading range with a long lower shadow (the longer the
Side By Side White Lines more bearish) with no, or almost no upper shadow.
Three Black Crows Forex
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, a sharp intraday sell-off is followed by a reversal which Don't Take
Thrusting causes the stock to close near its opening price near the day's high. Although the stock recovers from its Another Forex
Two Crows intraday sell-off, it suggests the bulls are starting to lose strength, and a reversal may occur. The pattern is
Upside Gap Two Crows a slightly more reliable if the real body is black. A weak following day on solid volume is still needed to Read This
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The bearish Hanging Man is similar to the bullish Dragonfly Doji and bullish Hammer.
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Bearish Hanging Man candles form very often so you need to use other indicators to confirm potential moves. Here BBBY formed 6 Months.
a Hanging Man candle that was followed up by a bearish Engulfing stick. That's a good one-two combination to play. ApnaNifty.com
After making a higher high DPH formed a bearish Hanging Man candle on strong volume and was followed a filled candle that
confirmed the reversal of the uptrend.
Here is a bearish Hanging Man candle that would be best used to exit a long position rather than as a short entry. The stock is
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Harami send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
In Neck Reliability: low
Kicking
Meeting Lines
Separating Lines
Shooting Star
A long white day is followed by a black day that gaps down and is completely engulfed by the real body of
Side By Side White Lines the first day.
Three Black Crows
Three Inside Down
Three Line Strike
The Psychology
Three Outside Down In an uptrend or within a bounce of a downtrend a long white day occurs. The next day's gap down comes
Thrusting as a surprise to bulls who thought they were sitting on a great position the previous day. Reliability of the
Tri Star
Two Crows bearish Harami is low, so a weak following day is needed for confirmation.
The bearish Harami could be the first two days of bearish Three Inside Down.
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Here is an example of a bearish Harami forming right at resistance. This situation offers the safest entry on the short side because
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AA also formed a bearish Harami at resistance. Notice the lack of volume on the rally up to the previous high. That's hint #1 that
the stock has limited upside potential. When the stock got rejected and dropped on big volume and then gapped down the next
day, the Harami candle was confirmed, and the stock did indeed reverse course.
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Harami Cross send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
Kicking
Meeting Lines
Separating Lines
Shooting Star
A long white day is followed by a Doji that gaps down and is completely engulfed by the real body of the
Side By Side White Lines first day.
Three Black Crows
Three Inside Down
Three Line Strike
The Psychology
Three Outside Down In an uptrend or within a bounce of a downtrend a long white day occurs. The next day's gap down comes
Thrusting as a surprise to bulls who thought they were sitting on a great position the previous day. Reliability of the
Tri Star
Two Crows bearish Harami Cross is better than that of the bearish Harami, but it is still on the low side. A weak
Upside Gap Two Crows following day is needed for confirmation.
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Given the average reliability of the Harami Cross candle as a reversal pattern, you need to look at other indicators or be picky in Another Forex
only playing the pattern at resistance. Here CGNX formed a small head & shoulder top pattern with a bearish Harami Cross at the Course Until You
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Identical Three Crows send to a friend
Company
Belt Hold
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Evening Doji Star
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The Truth
Harami
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Three black days occur with each day opening where the previous day closed.
Three Black Crows The Psychology Trading
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In an uptrend three successive days open at the previous day's close and close down on the day. This Software
Three Outside Down pattern is more severe than the Three Black Crows pattern and thus has a higher reliability as a reversal Build profitable
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TJX formed two Identical Three Crows formations in short order in the early fall months of 2003. You can see that by the time the Research
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In Neck send to a friend
Abandoned Baby Trader Makes

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A long black day is followed by a long white day that gaps down at the open and closes at the same price
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Three Black Crows Stock Market
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The Psychology Trading
Three Outside Down The In Neck pattern is a less severe relative of the On Neck pattern because it rallies further intraday. A Free Trial: 1800
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Kicking send to a friend
Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji
Hanging Man
Harami
Harami Cross
Kicking
Meeting Lines
Separating Lines
Shooting Star
A White Marubuzo (opens at low and closes at high) is followed by a Black Marubuzo (opens at high and
Side By Side White Lines closes at low) that gaps down.
Three Black Crows
Three Inside Down
Three Line Strike
The Psychology
Three Outside Down A big black candle that opens at its high and closes at the day's low is bearish regardless of the overall
Thrusting trend. Volume confirmation on the black day solidifies the patter as is a follow up weak day.
Tri Star
Two Crows
Upside Gap Two Crows The bearish Kicking is similar to the bearish Separating Lines.
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Separating Lines
Shooting Star
A long white day is followed by a long black day that gaps up at the open but then drops to close at the
Side By Side White Lines same price as the white day's close. Company
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend a long white day occurs. The next day gaps up at the open 2,000 Stock
Thrusting and most likely causes the remaining shorts to throw in the towel and cover while the smart money sells
Tri Star Analyst Reports &
Two Crows and gets short; the stock then drops. The author considers the identical close of the two candles to be Picks Free 14 Day
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The bearish Meeting Lines is similar to the bearish Dark Cloud Cover.
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On Neck send to a friend
Abandoned Baby
Breakaway
Doji Star
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Falling Three Methods Stock Tips &
Gravestone Doji
Hanging Man
Analysis
Harami Free Trial: 2000
Harami Cross
Identical Three Crows Pattern: continuation Stock Research
In Neck Reliability: moderate Reports with Buy
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Separating Lines
Shooting Star
A long black day is followed by a long white day that gaps down at the open and closes below the close of
Side By Side White Lines the black day.
Three Inside Down
Three Line Strike
Three Outside Down The On Neck pattern is a more severe relative of the In Neck pattern because it fails to rally as much Don't Take
Thrusting intraday. A gap down is seen as a buying and short covering opportunity, but failure to rally the stock up Another Forex
Two Crows into the previous day's range indicates the buying most likely will be brief and the downtrend will resume.
Upside Gap Two Crows Read This
The bearish On Neck is similar to the bullish Piercing Line, bearish In Neck, bearish Thrusting, and bullish Shocking Report
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Separating Lines send to a friend
Company
Belt Hold
Deliberation
Evening Doji Star
Evening Star
Forex
Gravestone Doji Candlesticks?
Harami
Identical Three Crows Pattern: continuation Course Until You
In Neck Reliability: low Read This
Kicking
Separating Lines
Shooting Star
A white day is followed by a black day that has the same opening price.
Three Black Crows The Psychology Trader Makes
Three Inside Down
Three Line Strike
In a downtrend, the price gaps down and bounces intraday with a white candle. This proves to be simple $18 Billion
Three Outside Down profit taking by shorts and bottom fishing by dumb longs when the downtrend continues with the next day's California trader
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Upside Gap Two Crows The bearish Separating Lines is similar to the bearish Kicking. Find out How
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Shooting Star send to a friend
Where are
Abandoned Baby
Belt Hold headed?
Breakaway
Doji Star
Dragonfly Doji
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Engulfing
Evening Doji Star
Evening Star
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In Neck Reliability: low/moderate Read This
Kicking
Separating Lines
Shooting Star
A small body forms at the lower end of the trading range. The upper shadow is usually long while the lower
Side By Side White Lines shadow is small or almost nonexistent.
Three Black Crows
Three Inside Down
The Psychology Stock
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, the stock gaps up. A valid attempt is made to rally the Free Trial: 1800
Thrusting stock, but the strength subsides and the stock falls to close near the day's low and near its opening price. Stock Research
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Two Crows Failure to follow through with strength suggests the bulls may be losing strength. Although this is not Reports with Buy
Upside Gap Two Crows necessarily extremely bearish, it is less bullish, so stops should be moved up or profits taken on longs. For & Sell Prices
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a reversal to occur a weak day is needed to confirm the pattern.
The bearish Shooting Star is similar to the bullish Inverted Hammer, bearish Gravestone Doji, and bullish
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Here is an example of how a bearish Shooting Star can be used to pick the top of a range. BMY was trading aimlessly without
much conviction in either direction, so a buying the bottom and selling and selling short the top would provide profits for the patient
trade. After the stock bounced from 25 to over 27, it was a Shooting Star candle that signaled the top.
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Here's a risky play. DCLK was in a good uptrend when it formed a bearish Shooting Star candle. It's a sign that longs should look California trader
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Side By Side White Lines send to a friend
Forex
Abandoned Baby
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Doji Star
Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Evening Star
Falling Three Methods Technical
Gravestone Doji
Hanging Man
Analysis
Harami Free Trial: 1800
Harami Cross
Identical Three Crows Pattern: continuation Stock Research
In Neck Reliability: moderate Reports with Buy
Meeting Lines
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Separating Lines
Shooting Star
A black day is followed by a white day that gaps in the direction of the trend. The third candle is also white
Side By Side White Lines and is almost identical to the previous day.
Three Inside Down
Three Line Strike
Three Outside Down In a downtrend a black day is followed by two white days that are gapped below the first day. The lack of headed?
Thrusting follow through on the second white day suggests the bears are still somewhat in control, and unless the The answer may
Two Crows bulls can fill that overhead gap with some volume behind the move, the downtrend will remain intact.
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Three Black Crows send to a friend
The Truth
Abandoned Baby
Advance Block About Forex
Breakaway
Doji Star
Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Evening Star
Hanging Man headed?
Harami
Identical Three Crows Pattern: reversal surprise you. Find
In Neck Reliability: high out now with
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Separating Lines
Shooting Star
Three long black days occur with each successive open being within the body of the previous day and
Side By Side White Lines each successive close being below the previous day's and near the day's low. Company
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, the three long black candles speak for themselves. If 2,000 Stock
Thrusting volume accompanies the move, the reliability of the pattern increases significantly.
Two Crows Picks Free 14 Day
Upside Gap Two Crows The bearish Three Black Crows is similar to the bearish Identical Three Crows, bullish Concealing Baby Trial- Sign Up
Swallow, bullish Ladder Bottom and bullish Three Stars in the South and could be the beginning of the Today!
bearish Three Line Strike. www.Morningstar.com
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Three Black Crows is a solid reversal pattern whose only flaw is the fact that it takes three down days to form, so going short after
Technical
its formation may be chasing the stock. You can see above SUNW dropped 8 points (about 12%) before the pattern was
Analysis
completed. Exiting a long at that time was a little late to enter a short carried higher risk.
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BMC presented a more favorable way to play a bearish Three Black Crows formation. The third candle also broke support. That's
Technical
a nice one-two combination and because the prudent trader will often wait until support it taken out, you don't feel like you are Analysis
chasing the play. School
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After gapping down, CKFR made a valiant attempt at filling the gap, but that attempt ended with a bearish Three Black Crows
formation. Notice the previous low held, so that's here you take profits.
Here's an example of a bearish Three Black Crows pattern that failed miserably...and it formed at resistance (40). They don't
always work!!
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Three Inside Down send to a friend
Abandoned Baby
Breakaway
Doji Star
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
The Truth
Harami
Kicking
Separating Lines
Shooting Star
A bearish Harami pattern is followed by a black day whose close is lower than the second day.
Three Black Crows The Psychology Where are
Three Inside Down
In an uptrend or within a bounce of a downtrend, a bearish Harami forms. By itself this pattern has stocks
Three Line Strike
Three Outside Down moderate reliability as a reversal pattern, but when followed by a weak day (preferably with a pick up in headed?
Thrusting volume) the overall pattern becomes much more reliable. The answer may
Two Crows
Upside Gap Two Crows The bearish Three Inside Down is a continuation of the bearish Harami. out now with
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DRD was in a steady uptrend, but the mid-September attempt at a higher high failed and resulted in a bearish Three Inside Down
View Free Online
candle formation which reversed the uptrend.
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SFD collapsed on huge volume in late June. The stock then experienced an oversold bounce which ended in a bearish Three trading Knowledge
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You owe it to
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Here is an example of when not to play a bearish Three Inside Down formation. LFG has just made a higher high on better than
average volume. The candle pattern was just a pause in an uptrend...not a reason to go short.
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Three Line Strike send to a friend
Forex
Abandoned Baby
Breakaway
Doji Star
Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Evening Star
Hanging Man headed?
Harami
Identical Three Crows Pattern: continuation surprise you. Find
In Neck Reliability: low out now with
Kicking
Separating Lines
Shooting Star
Three long black days with consecutively lower closes is followed by a fourth day that gaps in the direction
Side By Side White Lines of the trend and closes above the open of the first day. Company
Three Inside Down
Three Line Strike
Three Outside Down In a downtrend, the Three Line Strike pattern has low reliability. The large white day can really scare the 2,000 Stock
Thrusting shorts and many contrarians will site this as bearish. If indeed the downtrend is strong, the one white day
Two Crows should not ruin the pattern. Hence, if the next day is down, the downtrend should continue. Picks Free 14 Day
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The bearish Three Line Strike is a possible continuation of the bearish Three Black Crows. Today!
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Three Outside Down send to a friend
The Truth
Abandoned Baby
Breakaway
Doji Star
Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Gravestone Doji
Hanging Man
Research
Harami 2,000 Stock
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Meeting Lines
Shooting Star
A bearish Engulfing pattern is followed by a black day whose close is lower than the second day.
Three Black Crows The Psychology Where are
Three Inside Down
In an uptrend or within a bounce of a downtrend, a bearish Engulfing pattern forms. By itself this pattern stocks
Three Line Strike
Three Outside Down has moderate reliability as a reversal indicator, but when the it is followed by another black day (preferably headed?
Thrusting on strong volume), the overall pattern becomes much more reliable. The answer may
Two Crows
Upside Gap Two Crows The bearish Three Outside Down is a continuation of the bearish Engulfing. out now with
Chart of the Day.
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The bearish Three Outside Down pattern is one of the most reliable candle formations, and when it occurs at resistance, the
risk/reward on the short side is heavily in your favor. In this ATH example, support on the way down became resistance on the way
up, and after several weak attempts (see the low volume) to break up, the Three Outside Down pattern started the next leg down.
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Dow Jones 100

Year Chart
You owe it to
Here is another reliable scenario. Although NTAP was in a decent uptrend, the stock formed a bearish Three Outside Down yourself to study
pattern and broke support at the same time. That's a nice one-two punch. this picture of the
last century.
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SINA is an example of the riskiest way to play this formation. The stock was generally in a good uptrend with no noticeable Technical
resistance nearby. The Three Outside Down pattern did mark the end of the rally, but given the lack of overhead resistance, it was Analysis
a riskier play. Improve Your
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Thrusting send to a friend
Abandoned Baby
Breakaway
Doji Star
Downside Tasuki Gap
Engulfing
Evening Doji Star
Gravestone Doji
Hanging Man
Research
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Identical Three Crows Pattern: continuation Analyst Reports &
In Neck Reliability: low Picks Free 14 Day
Meeting Lines
Shooting Star
A black day is followed by a white day which gaps in the direction of the trend and closes below the
Side By Side White Lines midpoint of the black day.
Three Inside Down
Three Line Strike
Three Outside Down The Thrusting pattern is a weaker version of the bearish On Neck and bearish In Neck continuation headed?
Thrusting patterns. The bulls start to assert themselves as evidenced by the rally into the previous day's trading The answer may
Two Crows range, but by closing in the lower half of that range, the overall pattern is still bearish.
The bearish Thrusting is similar to the bullish Piercing Line, bearish On Neck, bearish In Neck, and bearish Chart of the Day.
Meeting Lines.
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Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Evening Star
Gravestone Doji Stock Market
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A Doji occurs on three consecutive trading days with the second gapping up and the third gapping back
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Three Outside Down In an uptrend or within a bounce of a downtrend, a battle begins. The bulls start to back off while the bears California trader
Thrusting step up. Dojis indicate an even battle between the bulls and bears. The formation of three Dojis within a
Tri Star makes $18 Billion
Two Crows uptrend hints that the bulls may be starting to reassert themselves. A black day with volume is needed to in a single year!
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Two Crows send to a friend
Forex
Abandoned Baby
Breakaway
Doji Star
Dragonfly Doji
Read This
Engulfing
Evening Doji Star
Gravestone Doji
Hanging Man
Research
Harami 2,000 Stock
Harami Cross
In Neck Reliability: moderate Picks Free 14 Day
Meeting Lines
Shooting Star
A long white day is followed by a black candle which gaps up in the direction of the trend. The final day
Side By Side White Lines opens within the body of the small black day, drops to fill the gap and closes within the body of the first
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Thrusting In an uptrend or within a bounce of a downtrend, a gap up which fails to close above its open hints at a
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The bearish Two Crows is similar to the bearish Upside Gap Two Crows and bearish Evening Star.
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Here's a bad example (sorry) of a bearish Two Crows pattern picking the top of a stock trading aimlessly. After the pattern was in
place the stock dropped about 10% in just a couple days.
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Upside Gap Two Crows send to a friend
Abandoned Baby
Breakaway
Doji Star
Downside Tasuki Gap
Engulfing
Evening Doji Star
Gravestone Doji
Hanging Man
Research
Harami 2,000 Stock
Harami Cross
Meeting Lines
Shooting Star
A long white day is followed by a black candle which gaps in the direction of the trend. The final day
Side By Side White Lines engulfs the small black day and closes within the gap of the first two days.
Three Inside Down
Three Line Strike
Three Outside Down In an uptrend or within a bounce of a downtrend, successive gaps up which close down to force a black headed?
Thrusting candle to form suggests the bulls are weaken. They are not able to rally the stock intraday and the bears The answer may
Two Crows are starting to take over. The reliability of the increases if the gaps up bump into resistance.
The bearish Upside Gap Two Crows is similar to the bearish Two Crows and bearish Evening Star. Chart of the Day.
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Here is an example of reversal pattern that would be better used to exit a long position rather than initiating a short. After all, the
stock had just bounced on big volume. The prudent trader would look to exit a long position and then rebuy the dip.
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Technical Analysis
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have used the pricing activity of stocks to derive formulas that assist in determining the underlying intentions of Research
the trading/investing participants. Here we discuss numerous popular technical indicators successful traders 4,000 Stock &
use in conjunction with chart patterns and candlestick patterns. Fund Reports.
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Technical Analysis from A to Z Technical Analysis of the Financial Markets

by Steven B. Achelis by John J. Murphy

Market Internal Indicators

Market Internal Indicators are technical indicators that deal with the overall market, not an individual stock.
Some, like the TRIN and New Highs/New Lows, are very short term indications of possible market direction
while others, like the Advance/Decline Line, are longer term. Here are some commonly used Internal
Indicators traders use.
Advance/Decline Line
Arms Index (TRIN)
Bullish Percent Index
McClellan Oscillator
McClellan Summation Index
New Highs/New Lows
Put/Call Ratio
VIX and VXO

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Advance/Decline Line send to a friend
The Advance/Decline Line (A/D Line) is a widely followed “breadth” Where are
indicator used to measure the market's internal strength. It is the stocks
Arms Index (TRIN) cumulative total of the difference between the number of NYSE issues that are advancing versus those headed?
Bullish Percent Index declining. The answer may
McClellan Oscillator surprise you. Find
New Highs/New Lows When the A/D Line is moving up the market is said to have good breadth while a downward sloping line out now with
Put/Call Ratio indicates internal weakness. Chart of the Day.
VIX and VXO
The A/D Line can be used to confirm the movement in the overall market or to hint at a possible reversal. If
both the market and the A/D line are moving up, one can expect the market strength to continue. But if the
market moves up while the A/D starts to flatten out and then move down, it hints at internal weakness, and
Stock Market
the overall market is very likely to pull back.
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On the downside, if both the market and the A/D Line are moving down, one can expect the market Stock Research
weakness to continue. But if the market moves down while the A/D Line starts to flatten out and then move Reports with Buy
up, internally the market is gaining some strength and the indexes will likely bottom and reverse course. & Sell Prices
www.Morningstar.com
The A/D Line is a long term indicator. The next two chart show an example of a positive divergence that formed between the NYSE
and the NYSE A/D Line. While the market was making a series of lower highs during the last half of 2002 and beginning months of $4 Billion Wiz
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The next two chart show the opposite situation. While the market was steadyily moving up, the A/D Line was making lower highs.
& Sell Prices
Something had to give. Either the market was going to pull back or the A/D Line was going to start moving up. In this case the A/D www.Morningstar.com
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TRIN (Arms Index) send to a friend
The Arms index, or TRIN, was developed by Richard Arms in 1967 and is Where are
used to determine the strength/weakness of the market on a day-to-day stocks
Arms Index (TRIN) basis. It takes into consideration the number of advancing and declining issues and the volume associated headed?
Bullish Percent Index with those issues. The answer may
New Highs/New Lows The formula is: ((advancing issues/declining issues)/(advancing volume/declining volume)) out now with
Put/Call Ratio Chart of the Day.
VIX and VXO If the TRIN > 1 the market is leaning bearish with a higher number being more bearish, but an extremely www.chartoftheday.com
high number being a possible contrarian indicator.
If the TRIN <1 the market is leaning bullish with a lower number being more bullish. Morningstar
Research
On a short term basis (for day traders only) the actual number is less important than the direction it is 4,000 Stock and
moving. So if the number is 1.5 but 2 hours ago it was 2.0, and it has been steadily falling, the number says Mutual Fund
the market is leaning bearish but the direction tells you the market is improving. Reports with
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Extreme readings can be used as evidence the market is either overbought or sold and will likely reverse, - Learn More
but this is a very short term indicator that should only be used by day traders. Morningstar.com
But again, unlike the A/D Line which is a “stand back and gauge the strength/weakness of the overall
market indicator,” the TRIN - for the most part - is strictly a short-term day-to-day guideline. There is Trading
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Here is a typical 5-minute indraday TRIN line. Judging by the value most of the day, it's safe to say it was a weak day for the market. Charting stocks,
But the TRIN's uptrend was broken 2 hours before the close, and then another support line was broken 1 hour before the close. Let's funds, indicators
see what happened to the S&P 500 during this day. www.decisionpoint.com
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As expected the market opened and immediately fell; it spent a majority of the day deep in the red. But when the TRIN topped out
around 12:00, the market bottomed. Then when the TRIN broke support around 14:00, the market broke resistance and started to
pick up some momentum. New lows for the TRIN was mirrored by new highs for the market.
But as we stated...this is a short term day trader's indicator that should be used with the intraday A/D Line to help determine intraday
activity.
The longer term indication given by the TRIN is associated with consistantly high readings. More specifically, if the TRIN closes
above 2.0 for 3 consecutive days, history says the market will move up. That doesn't mean it will rally hard; it just means over time, a
reading that high for 3 days has resulted in a very solid bounce. Here's an example.
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The S&P 500 proceeded to bounce 65 points over the following three weeks.
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Bullish Percent Index send to a friend
The Bullish Percent Index (BPI) is a popular market “breadth” indicator Where are
used to gauge the internal strength/weakness of the market. It is the stocks
Arms Index (TRIN) number of stocks in an index (or sector) that have point & figure buy signals relative to the total number of headed?
Bullish Percent Index stocks that comprise the index (or sector). So essentially it is the percentage of stocks that have buy The answer may
McClellan Summation Index signals. Generally speaking, values over 70% indicate an overbought situation whereas values under 30%
New Highs/New Lows indicate an oversold environment out now with
Put/Call Ratio Chart of the Day.
VIX and VXO
Like many of the market internal indicators, it is used both to confirm a move in the market and as a non- www.chartoftheday.com
confirmation and therefore divergence indication.
Morningstar
If the market is strong and moving up, the BPI should also be moving up as more and more stocks make Research
the “buy list.” When the market moves down, one expects the BPI to also move down to confirm the 4,000 Stock and
market's weakness. Mutual Fund
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However, if the market moves up while the BPI starts to head down, the market more likely than not will pull
Buy/Sell Opinions
back. This scenario unfolds when the big-caps are strong (they are causing the indexes to move up
- Learn More
because the indexes are weighted to favor them) but the small- and mid-caps are starting to weaken
Morningstar.com
(hence the BPI is moving down).
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Here is what a typical Bullish Percent Index chart looks like. Since the BPI is the percentage of stocks given a buy signal by their Stock Research
point & figure charts, mathematically the value must stay between 0 and 100. Reports with Buy
& Sell Prices
Looking at the above Bullish Percent chart of the NASDAQ, you can see the indicator being pretty good at picking a short term www.Morningstar.com
bottom when the BPI drops to around 30 or lower and then moves up. Also note the confirmation of the March to November
uptrend by the steadily rising BPI. But don't read too much into the failure of the indicator to make higher highs above 70 when the
market continues up - after all there is a ceiling at 100, and realistically it will never get close to that number.
TWR had traded sideways for many months when it formed this 4-month symmetrical triangle. Notice the volume surge on the
breakout as the stock rallied over 40% in under one week.
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McClellan Oscillator send to a friend
The McClellan Oscillator is a market breadth indicator developed by

Sherman and Marian McClellan. It is the smoothed difference between Decision Point
Arms Index (TRIN) advancing and declining issues on the NYSE. Your technical
Bullish Percent Index analysis toolbox.
McClellan Oscillator The oscillator typically fluctuates between -100 and 100. If the oscillator rallies to between 70 and 100 and Charting stocks,
New Highs/New Lows then turns down, the underlying market is believed to be overbought and a sell signal is offered. If the funds, indicators
Put/Call Ratio oscillator drops to between -70 and -100 and then bounces, the underlying is thought to be oversold and a www.decisionpoint.com
VIX and VXO
buy signal if given.
If the McClellan Oscillator goes beyond the 100 or -100 marks, a short-term reversal may briefly occur, but
Where are
it is very likely the trend will continue.
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We realize this chart is hard to read, so we'll walk you through it. The bottom line is the McClellan Oscillator. You can see how it
basically meanders up and down. The text book use of the oscillator is to buy the underlying issue when the oscillator goes below -
70 and then turns up and to sell or sell short when the oscillator goes above 70 and turns down. From the above example, each
buy signal was indeed a good signal, but each sell signal merely indicated a pause in the existing uptrend and shorting would have Where are
at best been a breakeven proposition. stocks
headed?
The opposite scenario probably would exist for a downtrending stock. Sell signals would work great while buy signals merely The answer may
indicate a pause in the downtrend. surprise you. Find
out now with
Chart of the Day.
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McClellan Summation Index send to a friend
The McClellan Summation Index was developed by Sherman and Marian

McClellan. It is a longer-term version of the McClellan Oscillator and is
Arms Index (TRIN) used to determine the market's overall health.
Bullish Percent Index
McClellan Oscillator The McClellans suggest a reading below -1300 hints that a major market bottom is near while a reading
New Highs/New Lows above 1600 indicates a major top will be hit soon.
Put/Call Ratio
VIX and VXO These top and bottom signals are more significant when a divergence between the overall market and this
index is present.
The following two charts exemplify how a positive divergence between an index and its McClellan Summation Index works. Notice
the NYSE making a series of lower highs, but the Summation Index made two higher lows. Strength was building, and the NYSE
took the lead of the SI and rallied.
Where are
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New Highs/New Lows send to a friend
The New Highs-New Lows (NH-NL) indicator is widely followed and used Morningstar
to gauge the market's strength. It is the difference between the number of Research
Arms Index (TRIN) stocks making 52-week highs versus those making 52-week lows. 4,000 Stock and
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New Highs/New Lows new lows, and vice versa when the market is weak. Buy/Sell Opinions
Put/Call Ratio - Learn More
VIX and VXO This indicator is most useful in identifying short term overbought or oversold situations. When the NH-NL Morningstar.com
line spikes up it often indicates a short term top. After all, with so many stocks making new highs, a
pullback in the near future would appear likely. On the other side, when the NH-NL line spikes down, it
Where are
reeks of a capitulation sell-off and often preludes a short-term bottom and market bounce.
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Put/Call Ratio send to a friend
The Put/Call ratio (P/C) was developed by Martin Zweig to determine the Where are
general market sentiment and expectations. It is a ratio of the number of stocks
Arms Index (TRIN) calls and puts traded on the Chicago Board Options Exchange (CBOE). headed?
Bullish Percent Index The answer may
McClellan Oscillator The CBOE widely advertises that 85% of all options expire worthless, and this is at the heart of the P/C's surprise you. Find
New Highs/New Lows effectiveness. Most of the options volume is due to buying, not selling. And unlike stocks where for every out now with
Put/Call Ratio buyer there is a seller and for every seller there is a buyer, the options market is very one-sided. The Chart of the Day.
VIX and VXO
exchange itself acts as a buyer to all sellers and a seller to all buyers. www.chartoftheday.com
Those who buy call options expect the market to rally while those who buy puts expect it to fall. Since most
options traders are wrong, one can get a clue as to the future move of the market by studying the action in
Stock Market
the options market. One could say the P/C is a contrarian indicator.
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When the Put/Call ratio spikes up, it indicates most traders belief that the market will fall. Since most Stock Research
options traders are wrong, one can use this as a clue that perhaps bearishness has reached an extreme Reports with Buy
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Since the market has a general bullish bias to begin with, this type of extreme put/call reading is not
equally effective on the downside.
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Here is a typical Put/Call line. It fluctuates wildly, and as you can see it spends most of its time below 1.0. This indicates call option surprise you. Find
volume usually beats put option volume. Spikes to the downside are not very useful, but spikes to the upside can indicate a panic out now with
by the bulls (they are buying puts to protect their holdings), and a bounce can occur. Chart of the Day.
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Here is the NYSE chart during this same time period. The spike in the Put/Call line did indeed signal an end to the small pullback
with an otherwise uptrending market.
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VIX and VXO (Volatility Index) send to a friend
The VIX and VXO have been introduced by the Chicago Board Options Option
Exchange (CBOE). They are hypothetical options that are at-the-money Calculators
Arms Index (TRIN) and have 30 days until expiration. They attempt to represent the implied volatility of their respective option. Assess the Risk of
Bullish Percent Index When prices fall, put option buyers are more willing to pay a higher premium, and the VIX and VXO move Derivatives.
McClellan Oscillator Download
McClellan Summation Index up. The opposite occurs when stock prices drop. Put buyers are less willing to "pay up" for puts, so the VIX
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The VIX is based on the SPX (S&P 500), and the VXO is based on the OEX (S&P 100).
When the market is weak and falling, the VIX and VXO move up, but when the VIX and VXO spike up to Where are
reach extreme levels, the market is thought to be oversold and due for a bounce. On the other hand, when stocks
the market is rallying, the VIX and VXO move down. It is believe low VIX and VXO readings can be used to headed?
determine short-term market tops. The answer may
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In the author's opinion, the VIX and VXO do have some value forecasting possible market bottoms when out now with
the VIX and VXO spike, but they are utterly useless while the market is strong. Chart of the Day.
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Here is a VXO chart during a 7-month period in late 2002. High readings indicate put option buyers paying a premium, but amateur
options players are usually wrong. So high VXO readings, which coorespond to put buyers being wrong at exactly the wrong time
should indicate a market bottom.
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Overlay Indicators
Overlay indicators are technical indicators that are plotted directly on an issue's
price chart. They are often used to determine trading ranges and periods of
extreme price movement. Here are the most popular Overlay Indicators
professional traders use.
Bollinger Bands
Donchian Channels
Exponential Moving Average
Keltner Channels
Linear Regression
Parabolic SAR
Price by Volume

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Bollinger Bands send to a friend
Bollinger Bans were developed by John Bollinger. They are a set of bands
that are plotted at 2 standard deviations above and below an exponential Decision Point
Bollinger Bands
Donchian Channels moving average (20-day is widely used) and are displayed over a stock's price chart. Using 2 standard Your technical
Exponential Moving Average deviations guarantees 95% of the price data will lay between the bands. analysis toolbox.
Keltner Channels
Linear Regression
Charting stocks,
Parabolic SAR Since the bands are plotted at standard deviation levels, they are self-adjusting. When a stock becomes funds, indicators
Price by Volume more volatile, the bands widen to give the stock more “room to move” within the bands. When a stock www.decisionpoint.com
meanders around with little day-to-day movement, the bands contract.
Because of the tendency for a stock to stay within the bands, prices are considered overbought when they
reach the upper band and oversold when they reach the lower band. Bollinger
bands
Bollinger offers the following characteristics: Virtually Eliminate
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• Expect sharp prices changes after volatility lessens and the bands narrow. with SmartOrder
• When a stock moves outside the bands, expect the trend to continue. Technology
• A reversal usually occurs after a bottom or top is made outside the bands and then the underlying issue www.vankartrading.com
moves back inside the bands.
• Prices tend to move from one band to the other, so this can aid in projecting price targets.
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Here is a typical set of Bollinger Bands with VECO. You can see how the stock spends most of its time within the bands and the Bollinger bands
general tendency to move back and forth between the bands. Used in conjuction with other indicators for confirmation, buying at Virtually Eliminate
the bottom band and selling at the top would provide consistent profits. Slippage Trade with
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Technical Analysis
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Charts, analysis,
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US indexes
This REMC chart reveals a stock's tendency to reverse after breaking through one of the bands and then pulling back within the www.marketvolume.com
bands.
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This XICO chart demonstrates two Bolliger Band principals. First is the tendency for a stock to experience a big move after the
bands have narrowed. You can see this in late June. Second, when the stock moved outside the top band, although the stock did
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Donchian Channels send to a friend
Donchian Channels (also called price channels) are simply an “envelope”

around a set a pricing data. The top of the channel is the highest high over Decision Point
Bollinger Bands
Donchian Channels a given period of time while the bottom of the channel is the lowest low over the same period. Your technical
Exponential Moving Average analysis toolbox.
Keltner Channels Like other channels, a stock can be traded within the channel from one boundary to the other while
Linear Regression
Charting stocks,
Parabolic SAR watching for “breakouts” in either direction or false breakouts. funds, indicators
Price by Volume www.decisionpoint.com
Simple Moving Average As a side note, since the channel top and bottom are the highest high and lowest low of a given time
period, it is mathematically impossible for the stock to breakout of the channel because the channel would
immediately move if a new extreme price was hit.
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Here is a 3-minute intraday chart of QQQ. First note the stock always stays within the Donchian Channel (it's mathematical - it's Kid makes $4
impossible to breakout). Overall, when the market is weak, note the tendency for QQQ to "ride" the channel down while Billion Trading
occasioanally popping up to touch the top of the channel. The is typical action for a trending day. Stock Options!
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Here again is a 3-minute QQQ chart except the stock is obviously in a steady uptrend. Equal and opposite the bearish action, note
the stock's tendency ride the upper part of the channel while occasionally pulling back to kiss the bottom channel line. Where are
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Charts, analysis,
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for US indexes

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Exponential Moving Average send to a friend
An Exponential Moving Average (EMA) is plotted as a line directly on a Morningstar

stock's price chart. Like the simple moving average, it is the average value Research
Bollinger Bands
Donchian Channels of a stock's price over a specified number of time intervals, but the exponential moving average applies 4,000 Stock and
Exponential Moving Average more weight to recent trading action. Mutual Fund
Keltner Channels Reports with
Linear Regression
Parabolic SAR Stocks have a tendency to either “ride” their moving averages or completely ignore them. If a stock tends Buy/Sell Opinions
Price by Volume to ride its MA, traders use the line as a buy or sell point. - Learn More
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That is a very simplified strategy and works great with some stocks, but offers no assistance with entries
and exits with other stocks. The prudent trader needs to do some homework to see which MA's (if any) Online Stock
work best with a particular stock. Trading
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Some traders also like to plot two different moving averages (typically a longer-term line and a shorter-term online with no
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CORI is a great example of a stock that likes to ride its Exponential Moving Average. Each time the stock rallied away from it, the
stock paused to allow the EMA to "catch up." Then the moving average acted as support, and the stock moved up again.
Some traders will plot two different moving averages over a stock chart and use the cross of the longer term moving average by
the shorter term MA for buy and sell signals. This type of strategy works well with gently rolling stocks that do not gap, and it
worked will for TV above (note this is a 60-minute chart). But don't try this with high beta volatile stocks because too many false
signals are suggested.
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Keltner Channels send to a friend
Keltner Channel is a volatility-based “envelope” indicator developed by

Chester Keltner. The difference between it and Bollinger Bands is that Decision Point
Bollinger Bands
Donchian Channels while Bollinger Bands represent volatility with standard deviation, Keltner channels use highs and lows. Your technical
Keltner Channels “Envelope” theory says prices will most likely stay within the envelope, so playing the range is a possible
Linear Regression
Charting stocks,
Parabolic SAR strategy. But if prices break through the channel, expect the price trend to continue. funds, indicators
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This 60-minute QQQ chart shows how a Keltner Channel is typically displayed on a price chart. Make note of the circled candles.
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Those are the times when the stock traded outside the channel. The first time was the second day of the chart (a Friday). The stock
Profitable
traded through the bottom, and that started a 2-day drop. The following Wednesday the stock traded through the top of the channel,
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and that started a solid trend day which is way for day traders to play. Two days later the stock again traded down through the www Meta Formula com/
channel's bottom, and a 2-day drop began. The only false move occurred on the next Tuesday when the stock traded above the
channel, but we actually do not consider this a false move because the stock gapped up there rather than trading up there. A big
Option
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Linear Regression send to a friend
A Linear Regression line is a “best fit” line modeling a scatter plot of data.
One can think of it as the equilibrium line of a set of data points. As used Option Calculators
Bollinger Bands
Donchian Channels in technical analysis, it simply offers an indication as to the general direction of the underlying issue over a Assess the Risk of
Exponential Moving Average designated period of time. Derivatives.
Keltner Channels
Linear Regression
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simply offers an idea as to the general direction of the underlying issue over a specified period of time. In this case a negative
divergence occurred. As the stock trended up, the RSI flattened out and began to move down. INTC then headed down.
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Parabolic SAR (stop and reversal) send to a friend
The Parabolic SAR is a system developed by Welles Wilder that helps

determine trailing stops for both long and short positions. Wilder
Bollinger Bands
Donchian Channels recommended using the dotted lines below the price as a stop for a long position and the dotted lines above
Exponential Moving Average the price as a stop for a short position.
Keltner Channels
Linear Regression
Parabolic SAR Wilder's goal was to capture as much of a trending move as possible. At the beginning of a move there will
Price by Volume be a decent cushion between a stock's price and the dotted line, but as the move progresses the dotted
line will get closer and closer to the stock's price thereby tightening one's stop.
This MMM chart shows how Parabolic SAR is displed on a stock chart. Wilder used the indicator to determine stops - not entries.
Note that as the stock trended, the little blue dots slowly got closer and closer to the price chart. Wilder's goal was to capture as
much of the move as possible using a mechanical system, and this indicator did a pretty good job as you can see.
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Technical
Analysis
Charts
Charts, analysis,
indicators and
trading systems
for US indexes

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Price by Volume send to a friend
Price by Volume plots volume horizontally on the price chart to indicate

how much volume occurred at each price point. It is very useful to see Decision Point
Bollinger Bands
Donchian Channels where the bulk of the volume occurred in determining support and resistance. Your technical
Keltner Channels
Linear Regression
Charting stocks,
Parabolic SAR funds, indicators
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This 13-month SPX chart shows how Price by Volume is displayed. Trader need to pay attention to the locations of large Price by $4 Billion
Volume bars because those areas will often act as either support or resistance. This price chart indicates trendline resistance in Wiz Kid Stock &
the 950-965 area and a severe lack of volume above that zone. If the index can breakout, the lack of overhead resistance Option Trader
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The SPX did break out, and the index quickly rallied to over 1000. Note the massive block of volume below 960 served as support Chart of the Day.
on two successful tests of "resistance turned support."
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Here is an example using Price by Volume that demonstrates why gaps often get filled. There is very little volume in the gap (and
actually there is no volume in the gap for the previous 7 months). The lack of volume translates to lack of resistance. So a move
into the gap could shift the supply/demand imbalance to favor the bulls because there are no sellers sitting in the gap wait to "get
out even." Let's see how this unfolded.
DGIN moved into the gap and filled it in one day. This may be a bad example because the stock rallied big, and you can't expect
that to happen often. But it's just an example of how Price by Volume can be used. Plot it on your charts to see where areas of
support and resistance my lie.
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Technical
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Simple Moving Average send to a friend
A Simple Moving Average (SMA) is plotted as a line directly on a stock's

price chart. It is the average value of the stock's closing price over a Decision Point
Bollinger Bands
Donchian Channels specified number of time intervals (i.e. the 50-day SMA is the average closing price over the previous 50 Your technical
Exponential Moving Average days on a daily chart, but on an hourly chart the 50-SMA would be the average closing price of the analysis toolbox.
Keltner Channels
Linear Regression previous 50 hours). Charting stocks,
Parabolic SAR funds, indicators
Price by Volume Stocks have a tendency to either “ride” their moving averages or completely ignore them. If a stock tends www.decisionpoint.com
to ride its MA, traders use the line as a buy or sell point.
That is a very simplified strategy and works great with some stocks, but offers no assistance with entries Morningstar
and exits with other stocks. The prudent trader needs to do some homework to see which MA's (if any) Research
work best with a particular stock. 4,000 Stock and
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On the other side, LRW used it 50-day moving average as support on this 100% rally off its low. out now with
Chart of the Day.
Some traders will plot two different moving averages over a stock chart and use the cross of the longer term moving average by
the shorter term MA for buy and sell signals. This type of strategy works well with gently rolling stocks that do not gap, and it
worked fairly well with INTC (note this is a 30-minute charts). But don't try this with high beta volatile stocks because too many
false signals are suggested.
» back to top
Where are
stocks
headed?
The answer may
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Chart Indicators
Chart Indicators are lines or series' of data points that are derived from an issue's opening, high, low, and
closing prices and/or volume. They attempt to either graphically confirm or not confirm price movement or
identify overbought or oversold areas. None of them work all the time, and they all have their ideal "working
conditions." The prudent trader should experiment to see what works best for him/her. Here are many
common technical indicators used by professional traders.
Accumulation/Distribution Line
ADX (Wilder's DMI)
Average True Range (ATR)
Chaikin Money Flow (CMF)
Chaikin Oscillator
Commodity Channel Index (CCI)
Comparative Relative Strength
MACD
MACD Histogram
Momentum
Price Oscillator (PPO)
Rate of Change (ROC)
Relative Strength Index (RSI)
Stochastic Oscillator
Volume
Volume Oscillator (PVO)
Williams %R

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Accumulation/Distribution Line send to a friend
The Accumulation/Distribution Line is a cumulative momentum indicator Stock Tips &

that uses price and volume to determine whether money is flowing into or Analysis
ADX (Wilder's DMI) out of a stock. It is similar to On Balance Volume (OBV) but instead of adding or subtracting the day's Free Trial: 2000
Average True Range (ATR) volume if the stock is up or down, the Accumulation/Distribution Line adds or subtracts a percent of the
Chaikin Money Flow (CMF) Stock Research
Chaikin Oscillator day's volume based on where the stock closed in relation to it high and low. Reports with Buy
Comparative Relative Strength & Sell Prices
If a stock closes very close to the high of day then most of the volume is added to the cumulative total. If a www.Morningstar.com
MACD
MACD Histogram stock closes near its low, most of the volume is subtracted. This implies that if a stock consistently closes
Momentum near its high on solid volume while having an occasional down day on weak volume, the
Price Oscillator (PPO) Accumulation/Distribution Line will trend up with occasional small pullbacks. Where are
Rate of Change (ROC) stocks
Like many indicators, the Accumulation/Distribution Line ought to move in the direction of the underlying headed?
Volume issue, and a divergence is a hint that reversal may be near. The answer may
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This DAL chart shows an example of a negative divergence the occurred between the stock and its Accumulation/Distribution Line. Mutual Fund
The stock was bouncing and made two higher highs, but the indicator was trending down. That means volume on up days tended Reports with
to be lighter than volume on down days and many more days the stock closed near its intraday low rather that near its intraday Buy/Sell Opinions
high. DAL eventually succumbed and fell. - Learn More
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AA shows a positive divergence. While the stock was trending down, its Accumulation/Distribution Line was in a steady uptrend
for US indexes
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ADX (Wilder's DMI - send to a friend
Directional Movement Index)
Stock Market
Accumulation/Distribution Line The Directional Movement is a trading system developed by Welles Wilder to help determine if a stock is Trading
ADX (Wilder's DMI)
trending. The system involves the 14-day +DI (directional indicator) and the 14-day -DI. Wilder suggested Free Trial: 1800
Chaikin Money Flow (CMF) buying when +DI rises above -DI and selling when +DI falls below -DI. Stock Research
Chaikin Oscillator Reports with Buy
Comparative Relative Strength But this overly simplified suggestion offered many false signals, so Wilder went a step further. He then & Sell Prices
MACD suggested noting the high of the day when the +DI crosses over the -DI and only buying when prices www.Morningstar.com
MACD Histogram
Momentum
eclipse this high. Likewise he suggested noting the low of the day when the +DI crossed below the -DI and
On Balance Volume (OBV) to only sell when the stock made a new low.
Price Oscillator (PPO) Where are
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Here is a simplified usage of ADX. When the line (the black line) is high, an indication is made the underlying issue is trending and
Stock Research
may be playable for a trend trade. But when the ADX value is low, the underlying issue is churning sideways and is only playable
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This QQQ chart shows examples as to how ADX can be used to offer buy and sell signals. A buy signal is given when the +DI line in a single year!
(green line) crosses up through the -DI line (red line) and the ADX line (black line) is also trading above the -DI line. A sell signal is Find out How
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ATR (Average True Range) send to a friend
Average True Range was introduced by Welles Wilder as a measure of Morningstar

volatility. It was not meant to provide an indication of price direction but Research
ADX (Wilder's DMI) instead the degree of price movement (i.e. volatility). 4,000 Stock and
Average True Range (ATR) Mutual Fund
Chaikin Money Flow (CMF) It is the average range a stock typically covers in a specified period of time. For example if the daily ATR Reports with
Chaikin Oscillator
Commodity Channel Index (CCI) (14) is 2.0, then over the last 14 days, on average, the stock's daily range (price difference from high to low) Buy/Sell Opinions
Comparative Relative Strength was 2 points. - Learn More
MACD
Morningstar.com
MACD Histogram
Momentum Another usage of ATR is with the actual number itself. If you are a swing trader who plans on holding a
On Balance Volume (OBV) position for 5-7 days, and the weekly ATR is 4 points, it doesn't make sense to put a 1 point stop on the
position because the normal fluctuations that typically take place during the week will likely stop you out.
Volume Wilder found that market bottoms were signified by high ATR values after a panic sell-off occurred, and low The answer may
Volume Oscillator (PVO) ATR values implied sideways trading or consolidation periods that often occur at market tops. surprise you. Find
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This HOV daily chart shows how ATR is typically displayed. Notice while the stock was churing around for the first few months of
the chart, the ATR was low, but when the stock started to move, its ATR also moved up signifying a much more lively and active Where are
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Here is a weekly chart of JNJ. Notice how the stock become less volatile as it dropped, and that a pick up in volatility may signal
and end to the down trend.
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This TOL chart shows how a relatively high ATR reading can often signal a short term top (buyers are exhausted) while a low
volatilty reading can signal a bottom.
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CMF (Chaikin Money Flow ) send to a friend
The Chaikin Money Flow (CMF) was developed by Marc Chaikin to Trader Makes
determine the degree to which money was flowing into or out of a security. $18 Billion
ADX (Wilder's DMI) But before we delve into a description, a little background information is needed. California trader
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Joe Granville came first with his On Balance Volume (OBV) indicator. It compared a stock's closing price
Chaikin Oscillator in a single year!
Commodity Channel Index (CCI) with its previous day's close and either added or subtracted the volume if the stock was up or down
Comparative Relative Strength Find out How
respectively. www.VirtualinvestingClub
MACD
MACD Histogram
Momentum Larry Williams came next. He improved (this is subjective) the OBV by comparing a stock's closing price
On Balance Volume (OBV) with the opening price and then added or subtracted volume based on the degree to which the stock closed
above or below its open.
Then Marc Chaikin entered the scene. Instead of using the opening price like Williams, he (Chaikin) used
Volume Oscillator (PVO) the mean price (the midpoint of the day's action). Chaikin believed that if a stock closed in the upper half of
its trading range on a particular day and volume was strong, the stock was being accumulated, but if the
out now with
stock closed in the lower half of its range, it was being distributed. Based on whether a stock closed in its
Chart of the Day.
top or bottom half, Chaikin would either add or subtract volume. And while comparing stock trends through
published resources and online resources is essential, getting information from the CMF may serve as a
safety net or somewhat a life insurance when things go wrong.
Technical
As with other indicators, Chaikin suggested looking for a divergence between the pricing action and the Analysis
oscillator. If a stock trends up while the CMF rolls over and heads down, the stock will very likely top out Charts
soon after. On the other hand , if a stock trends down while the CMF bottoms out and begins to move up, Charts, analysis,
the stock will very likely follow. indicators and
trading systems
The values of the CMF can also be used to indicate buying and selling pressure. Values that bounce for US indexes
between 0.1 and -0.1 and otherwise hang around the zero line are not strong enough to offer a bullish or www.marketvolume.com
bearish signal. Values above 0.1 and below -0.1 are indicative of buying and selling pressure respectively
while values above 0.25 and below -0.25 are indicative of strong buying and selling.
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Here is an example of a postive divergence that occurred between Alcoa's stock chart and its CMF. As the stock was declining, Morningstar.com
money was actually flowing into the stock, and this buying eventually won out and the stock rallied nicely.
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This TWX chart demonstrates another positive divergence. The stock fell hard in late '99 and early 2000, and then as the stock
flattened out and traded sideways, money started leaving the stock at a much slower rate (indicated by the negative CMF which
was trending up). The stock then experience a nice tradeable bounce.
Here is an example of a negative divergence. After rallying all summer, IBM traded sideways for 3 months, but the CMF chart
indicated money was leaving the stock. IBM eventually broke support and fell.
This JCP chart displays another negative CMF divergence. The stock was trendine up but the CMF was trending down. JCP
eventually broke support and succumbed to the negative money flow.
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Chaikin Oscillator send to a friend
The Chaikin Oscillator is a moving average oscillator based on the Morningstar

accumulation/distribution line. It is an indicator of the Research
ADX (Wilder's DMI) accumulation/distribution…i.e. an indicator of an indicator. 4,000 Stock and
Chaikin Money Flow (CMF) The Chaikin Oscillator is calculated by subtracting the 10-period exponential moving average of the Reports with
Chaikin Oscillator
Commodity Channel Index (CCI) accumulation/distribution line from the 3-period exponential moving average of the accumulation/distribution Buy/Sell Opinions
Comparative Relative Strength line. - Learn More
MACD
Morningstar.com
MACD Histogram
Momentum A buy signal is offered when the oscillator crosses over the centerline while sell signal is offered when the
On Balance Volume (OBV) oscillator crosses down through the centerline.
Also, like many indicators, a divergence between the pricing action and the indicator's movement is a stocks
warning that the underlying issue's trend may reverse in the short term. So if a stock trends up while the
Volume Oscillator (PVO) Chaikin Oscillator rolls over and heads down, the stock will very likely top out soon after. On the other
hand, if a stock trends down while the oscillator bottoms out and begins to move up, the stock will likely
out now with
follow suit.
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The most powerful use of most chart indicators is when divergences form. Indicators should support and confirm a stock's move,
Reports with Buy
and when they don't, the indicator usually wins. In the above chart, each time a negative divergence occurred between the stock
& Sell Prices
chart and the Chaikin Oscillator, the stock fell, and the one time a positive divergence formed, the stock rallied. www.Morningstar.com
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This PG chart shows another positive divergence between the stock chart and the Chaikin Oscillator. It also shows an example as Trading Stock
to how the Chaikin Oscillator can be used in determining a entry point. When the indicator broke above its resistance and crossed Options!
the center line, the stock immediatley did the same thing. www.VirtualinvestingClub
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CCI (Commodity Channel Index) send to a friend
The Commodity Channel Index, which can be used effectively for stocks,
not just commodities, was developed by Donald Lambert. It is meant to Stock
ADX (Wilder's DMI) decipher a stock's trendiness. The faster the indicator is moving the stronger the trend is, and if the CCI Free Trial: 1800
Average True Range (ATR) bounces around in a small range, it simply indicates the lack of a trend. Stock Research
Chaikin Oscillator
Reports with Buy
Commodity Channel Index (CCI) The CCI can be used as an overbought/oversold indicator. Readings above 100 imply an overbought & Sell Prices
Comparative Relative Strength situation and a possible pullback while readings under -100 imply an oversold condition and a possible www.Morningstar.com
MACD
MACD Histogram reversal bounce.
Momentum
On Balance Volume (OBV) The CCI can also be used as a divergence. If a stock makes a new high but the CCI fails to follow suite, a
warning is given that a pullback is likely.
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This QQQ chart shows how CCI can be used as an overbought/oversold signal. The indicator is not perfect, but if you bought when Stock Research
the CCI fell below -100 and then moved up and sold when the CCI moved above 100 and then fell, you would have done pretty Reports with Buy
well. & Sell Prices
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Here is another example of the CCI being used to determine entries and exits. Again, it's not perfect, but when used with other Billion Trading
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Comparative Relative Strength send to a friend
Comparative Relative Strength simply compares the price of one security Morningstar
with the price of another security or an index. It is most often used to Research
ADX (Wilder's DMI) compare a stock with an index or the sector to which it belongs. 4,000 Stock and
Chaikin Money Flow (CMF) When the market or an individual sector is trending up, traders like to concentrate their buying in the Reports with
Chaikin Oscillator
Commodity Channel Index (CCI) strongest stocks, and Price Relative helps to identify which stocks are leading. Buy/Sell Opinions
Comparative Relative Strength - Learn More
MACD When the market or an individual sector is trending down, traders like to concentrate their shorting in the Morningstar.com
MACD Histogram
Momentum weakest stocks, and Price Relative helps to identify which stocks are lagging.
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This chart shows that although MSFT was moving up, it was moving up at a much slower rate than the NASDAQ. Since the stock
was so weak compared to the NASDAQ, all it takes is a little Nas pullback for the stock to fall hard. Where are
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Here is an example of MMM holding on strong while the market was falling. Despite the market weakness, MMM held tight, and
when the market bounced, being one of the stronger stocks, MMM took off.
Here is an example of a trendline berakout being used on an indicator. SUNW was underperforming the NASDAQ, but then "broke
out" and the stock did the same. This shows a shift is strength. The stock went from underperforming to outperforming and that's
enough to at least demand a look.
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MACD send to a friend
Company
The MACD (moving average convergence/divergence) was developed by Stock
Gerald Appel. It is a momentum indicator that plots the difference between Research
ADX (Wilder's DMI) two moving averages (the 26-day and 12-day EMAs are most often used) and a third MA (usually the 9- 2,000 Stock
Average True Range (ATR) day EMA). This 3 rd MA is the signal or reference line.
Chaikin Money Flow (CMF) Analyst Reports &
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MACD Histogram www.Morningstar.com
Momentum • Crossovers – some traders will buy when the MACD crosses over it's signal line and sell or sell short
On Balance Volume (OBV) when it cross down through its signal line. They will also look to buy and sell when the MACD crosses up or
down through the zero line.
• Divergence – The MACD will generally lag the underlying price slightly (i.e. when a stock moves up so
Volume Oscillator (PVO) will the MACD but slightly delayed), but when a divergence occurs where the MACD fails to confirm the
underlying issue's movement, the stock price typically reverses. So if a stock is rallying and the MACD tops
out now with
out and starts to head down, a big hint is being given that the stock , too , will top out soon. On the other
Chart of the Day.
hand, if a stock falls but the MACD flattens out and starts to move up, a near-term bottom in the stock is
likely.
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Here is an example of how MACD is often used to determine entries and exits. A buy signal is given when the shorter term line
(the black line) crosses up through the longer term line (the blue line). This occurred in mid October. A sell signal is offered when a
cross happens to the downside. Using this strategy, you entries and exits would have been pretty good.
Here is an example of a positive divergence with the MACD. QQQ was trending down, but its MACD bottomed and maded a
higher low. The indicator led, and the stock turned around and moved up.
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RGLD formed a negative divergence. While the stock was moving up, its MACD was moving down, and when this happens, the ! Free
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MACD Histogram send to a friend
The MACD Histogram is similar in concept to the standard MACD except Morningstar
the histogram normalizes the signal or reference line to zero. This helps Research
ADX (Wilder's DMI) solve the lagging problem of the standard MACD. 4,000 Stock and
Chaikin Money Flow (CMF) The same principals apply here. Buy signals are generated when the MACD crosses over the zero line Reports with
Chaikin Oscillator
Commodity Channel Index (CCI) while sell signals are given when the zero line is crosses to the downside. Also when a stock moves up and Buy/Sell Opinions
Comparative Relative Strength the MACD Histogram fails to confirm the move, a divergence occurs. This signals a pullback may be - Learn More
MACD
MACD Histogram coming. And when a stock moves lower while the MACD Histogram flattens out and moves up, a near-term Morningstar.com
Momentum bottom is likely.
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The MACD Histogram is most useful when it diverges from the underlying stock. In the above example, NTES made a series of
higher highs while in a steady uptrend, but its MACD Histogram trended down and did not confirm the move. The stock eventually
gave in.
Here is a positive divergence. QQQ trended down, but the MACD made a series of higher lows and then crossed the center line.
That was the signal to go long.
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Technical
Analysis
Charts
Charts, analysis,
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for US indexes
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Momentum send to a friend
The Momentum indicator measures the rate of change of a stock over a Official
specified period of time. One could say it indicates the velocity of a move. MetaStockÂ®
ADX (Wilder's DMI) Where the ROC displays this as a percentage, Momentum displays it as a ratio. Site
Average True Range (ATR) Trading Software
Chaikin Money Flow (CMF) Momentum can be used to trade trends (i.e. buy when oscillator bottoms and turns up and sell when the and Data. Get
Chaikin Oscillator
Commodity Channel Index (CCI) oscillator tops and starts to fall). your Free 30-day
Comparative Relative Strength trial
MACD But often when Momentum reaches extreme levels, although a reversal in prices may be near, one should www.Equis.com
MACD Histogram
Momentum assume the trend will continue.
Rate of Change (ROC) Stock
Stochastic Oscillator Free Trial: 1800
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This INTC chart shows how Momentum acts (or causes the underlying stock to act depending on your perspective) during a solid Net App
uptrend. As INTC rallied, Momentum moved up thus confirming the move. But when Momentum reached a peak level, a signal was Monitoring
given that the stock wasn't necessarily going to reverse, but some sideways trading was in order. Each time Momentum peaked, Powerful indepth
INTC moved sideways. Net App
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OBV (On Balance Volume) send to a friend
On Balance Volume is a cumulative momentum indicator developed by

Joe Granville. It uses both price and volume to determine whether money Stock
ADX (Wilder's DMI) is generally flowing into or out of a stock. Free Trial: 1800
Average True Range (ATR) Stock Research
Chaikin Money Flow (CMF) When a stock closes positive, it is believe money is flowing into the stock, so its volume is added to the on Reports with Buy
Chaikin Oscillator
Commodity Channel Index (CCI) balance volume total. When the stock closes negative, it is thought that money is flowing out of a stock, so & Sell Prices
Comparative Relative Strength its traded volume on that particular day is subtracted from its on balance volume total. www.Morningstar.com
MACD
MACD Histogram
Momentum The On Balance Volume does have a major flaw in its calculation. It completely disregards how much a
On Balance Volume (OBV) stock closed up or down. Common sense says there is a big difference between a stock closing up 10
cents or 2 dollars, but the On Balance Volume does not differentiate the two. Because of this the On
Balance Volume should not be used as a short-term indicator. Instead one should simply look at the overall headed?
Volume direction to confirm or not confirm whether money is flowing into or out of an issue. The answer may
Divergences work here too. If the market moves up while the OBV tops out and moves down, a warning is
out now with
served that a pullback is near. Likewise if the market moves down while the OBV flattens out and moves
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up, a short-term bottom is near.
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This is what you'd like to see from OBV when a stock is rallying. The OBV was steadily moving up, and this confirms more money
funds, indicators
is moving into the stock on up days than leaving it on down days. www.decisionpoint.com
Stock
Free Trial: 1800
Stock Research
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This HLTH chart demonstrates a powerful negative divergence. The stock rallied but the OBV was flat. Money was not supporting
the move up, and the lack of powerful buying eventually gave way when support was broken.
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PPO (Price Oscillator) send to a friend
The Price Oscillator is a momentum indicator that plots the difference Stock & Funds
between two moving averages. It is identical to the MACD except the Research
ADX (Wilder's DMI) MACD typically uses the 26-day and 12-day EMAs while the PPO allows the user to select which two Get Insights with
Average True Range (ATR) EMAs to use. Also, while the MACD uses points, the PPO uses percentages. Nevertheless, if you eliminate
Chaikin Money Flow (CMF) Morningstar. 4000
Chaikin Oscillator the scale on the side of the chart, one will get the exact same result with either one. Reports with Free
Comparative Relative Strength 14 Day Trial!
The PPO is most effective in wide-swinging trending markets and tends to lag price movements. It has a www.Morningstar.com
MACD
MACD Histogram couple popular uses.
Momentum
On Balance Volume (OBV) • Crossovers – some traders will buy when the PPO crosses up over its signal line and sell or sell short
when it cross down through its signal line. They will also look to buy and sell when the PPO crosses up or
down through the zero line. headed?
Volume Oscillator (PVO) • Divergence – The PPO will generally lag the underlying slightly (i.e. when a stock moves up so will the
PPO but slightly delayed), but when a divergence occurs where the PPO fails to confirm the underlying
out now with
issue's movement, the stock price typically reverses. So if a stock is rallying and the PPO tops out and
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starts to head down, a big hint is being given that the stock too will top out soon. On the other hand, if a
stock falls but the PPO flattens out and starts to move up, a near-term bottom in the stock is likely.
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The GE chart demonstrates how a negative divergence can be used to as a warning that lower prices are coming. GE moved up,
but its PPO flattened out. As with many case, the stock eventually followed the indicator...in this case down for a pullback.
Here is an example as to how PPO can be used to offer buy and sell signals. A buy signal is given when the shorter term line (the
black line) crosses up over the longer term line (the blue line), and sell signal is offered when there is a "cross down." If this stategy
was employed with the above chart, you entries were not perfect, but they weren't bad either.
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ROC (Rate of Change) send to a friend
The Rate of Change is an oscillator that indicates the change in price Morningstar
between “today” and the price x periods ago. So the 10-day ROC is the Research
ADX (Wilder's DMI) percentage change in price between today's closing price and the closing price 10 days ago. 4,000 Stock and
Chaikin Money Flow (CMF) The ROC is generally used as a short-term overbought or oversold indicator. The higher the ROC goes, the Reports with
Chaikin Oscillator
Commodity Channel Index (CCI) more overbought the underlying is and the more likely a pullback will occur. The lower the ROC goes, the Buy/Sell Opinions
Comparative Relative Strength more oversold the underlying stock is, and a bounce is due. - Learn More
MACD
Morningstar.com
MACD Histogram
Momentum But like many other indicators one needs to do his/her homework to determine historically what ROC
On Balance Volume (OBV) values are typically high or low for a particular stock.
Rate of Change (ROC) Decision Point
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Here is a great example of ROC being used as an overbought/oversold indicator. If you would have bought each time the indicator
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Here's how ROC could be used in an uptrending stock. Notice how buy signals were given just before the stock rallied and sell
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RSI (Relative Strength Index) send to a friend
RSI is an oscillator developed by Welles Wilder. It ranges between 0 and

100 and compares the magnitude of a stock's recent gains/losses with the Decision Point
ADX (Wilder's DMI) stock's pricing action over a given time period (14-day RSI is most popular). Your technical
Average True Range (ATR) analysis toolbox.
Chaikin Money Flow (CMF) Like moving averages, traders should experiment with different time frames to see what works best for an
Chaikin Oscillator
Charting stocks,
Commodity Channel Index (CCI) individual stock. funds, indicators
Comparative Relative Strength www.decisionpoint.com
MACD Wilder recommends a couple uses for RSI…
MACD Histogram
Momentum
On Balance Volume (OBV) • The RSI usually tops around 70 and bottoms around 30. This typically corresponds to a short-term top
Price Oscillator (PPO) and bottom with the underlying issue.
Rate of Change (ROC) Stock
Stochastic Oscillator • The RSI does sometimes form chart patterns with easily determined support and resistance. Often a Free Trial: 1800
Volume breakout or down of the RSI will lead to a move up or down with the underlying issue. Stock Research
Williams %R Reports with Buy &
• The most powerful usage is when a divergence forms between the RSI and the underlying. If a stock Sell Prices
moves up and makes a higher high but the RSI flattens out and moves down, the stock very likely will www.Morningstar.com
reverse and drop. On the flip side, when the stock moves down to new lows and the RSI flattens out and
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The most powerful usage of RSI is when a divergence forms. Here you can see the VXO was moving up but its RSI was flat. www.Morningstar.com
When this happens the indicator usually wins, and it did. VXO fell. The a positive divergence formed. VXO was trading flat while
the RSI had started to move up.When the RSI bounced off support, so did the underlying index, and when the RSI made a higher
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This BWA weekly chart shows two negative divergences which both worked great. In both cases the stock was trending up while
the RSI did not confirm the move. In the first case, the RSI was flat while the second scenario shows the RSI had already started
to move down.
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The middle of this chart shows a confirming RSI. The stock moved up and so did the indicator. Then the stock flattened out, but ForexCandlesticksMadeE
the RSI was more aggressive to the downside. The stock, as they often do, did as the indicator did.
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Stochastic Oscillator send to a friend
Get
The Fast Stochastic Oscillator was developed by George Lane . It Morningstar
compares a stock's closing price with its price range over a given period of Research
ADX (Wilder's DMI) time. Lane observed that as prices move up, closing prices tend to be in the upper end of its range and 4,000 Stock &
Average True Range (ATR) when prices move down, stocks tend to close in the bottom part of its range.
Chaikin Money Flow (CMF) Fund Reports.
Chaikin Oscillator Sign Up For a
Commodity Channel Index (CCI) The Fast Stochastic is displayed as two lines. The main line (%K) is displayed as a solid line. The second
Comparative Relative Strength Free 14 Day Trial
line (%D) is the moving average of %K and is displayed as a dotted line.
MACD Today!
Momentum There are 3 ways the Stochastic is typically used.
Price Oscillator (PPO) • When the Stochastic (either %K or %D) rallies above a specific value (80 is often used) and then fallsForex Trading
Rate of Change (ROC) Signals
Relative Strength Index (RSI) below that value, a sell signal is given. When the Stochastic falls below a value (20 for example) and then
Stochastic Oscillator Superior
rises above it, a buy signal is offered.
Volume performance
Williams %R • A buy signal is given when %K crosses above %D and a sell signal is indicated when %K falls below %D. Forecast exact
Buy and Sell
• Divergences between the underlying issue's price movement and the Stochastic also offers good buy levels
and sell signals. If prices move up but the Stochastic does not, prices may reverse at least in the short gcitrading.com
term. If prices move down but the Stochastic starts to turn up, prices very likely will bottom and reverse.
Where are
The Stochastic works best in wide-swinging markets and typically does not work well in a trending market.
stocks
As with many indicators, the prudent trader needs to do his/her homework to see which stocks can be
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This GLW chart demonstrates how the Stochastic Oscillator can be used to offer buy and sell signals. When a crossover occurs Stock Market
from a low level, a buy signal is given, and when the oscillator crosses down from a high level, a sell signal is given. Using this Trading
strategy on the above chart, your results would have been pretty good. Free Trial: 1800
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The Stochastic can also offer buy and sell signals when a divergence occurs. Twice the Stochastic diverged from its underlying
issue (QQQ) and both times the stock pulled back. But do note the stock was in a steady uptrend, so the divergence was simply a
warning for the bulls that a pullback was likely coming. It was not a reason to go short unless you were a very slick short term
trader.
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Volume send to a friend
Company
Volume is simply the number of shares traded in a given time period. Stock
Volume typically either confirms or does not confirm a price move because Research
ADX (Wilder's DMI) it indicates the number of investors/traders “voting” for the move. 2,000 Stock
Chaikin Money Flow (CMF) Analyst Reports &
If a stock moves up and volume is strong, all signs point towards continued strength. But if prices move up
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Commodity Channel Index (CCI) while volume falls off, less “votes” are being cast in favor of the move and a short-term pullback may occur.
Comparative Relative Strength Trial- Sign Up
MACD But on the other hand, although one likes to see strong volume to support a price move, too much volume Today!
Momentum is a sign that a reversal may be coming. It is not uncommon to see a huge volume spike at tops or bottoms
On Balance Volume (OBV) as either shorts scramble to cover , or longs sell at any cost , respectively.
Low volume simply means there is much uncertainty with regards to a stock's trading activity and future stocks
movement. Combined with Bollinger Bands, a period of low volume and little volatility often ends in an
Volume Oscillator (PVO) explosive move.
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When a stock is strong, you want there to be solid volume surges to support the move. This ADIC chart, which was trading flat and Mutual Fund
then began an uptrend in mid August had several bursts of volume to support the move. Reports with
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When a stock moves up but volume fails to confirm the move, the stock will often pullback. Volume = votes, and when volume is
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light, one could say not many traders are "voting" for whatever move the stock is experiencing. Here MMM was slowly moving up
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This is exactly what you want the volume to look like when a stock is rallying. When the stock moved up, volume significantly
picked up, and if you look closedly, you can see the blue line on the volume chart moving up too. Volume confirmation is important
in identifying strong stocks.
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Research
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Decision Point
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Volume Oscillator send to a friend
The Volume Oscillator is identical to the Price Oscillator (PPO) except we Net App
are obviously dealing with volume, not prices. Monitoring
ADX (Wilder's DMI)
Powerful indepth
Average True Range (ATR) Since volume is so closely watched by traders to confirm or not confirm a price move, traders use the PVO Net App
Chaikin Money Flow (CMF) to determine if volume momentum is increasing or decreasing. monitoring See
Chaikin Oscillator
Commodity Channel Index (CCI) latency, IO per
Comparative Relative Strength When the PVO crosses up over the zero line, it indicates shorter term volume is moving up in relation to volumes, more.
MACD longer term volume, but if the PVO crosses down below the zero line, it indicates shorter term volume is www.LogicMonitor.com
MACD Histogram
Momentum falling off compared to longer term volume.
On Balance Volume (OBV) Company
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Here is an example of how PVO can be used when a negative divergence forms. As GE was moving up, volume was falling off, so
the Volume Oscillator moved down. Although we would not necessarily recommend going short, the divergence is enough to raise Where are
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Williams %R send to a friend
Williams %R (pronounced “percent R”) is a momentum indicator

developed by Larry Williams. It oscillates between 0 and -100. Readings in Decision Point
ADX (Wilder's DMI) the -80 to -100 range indicate an oversold condition while readings in the 0 to -20 range indicate an Your technical
Average True Range (ATR) overbought condition. analysis toolbox.
Chaikin Oscillator
Charting stocks,
Commodity Channel Index (CCI) Like many “overbought/oversold” oscillators it is best to wait for the underlying's price to change direction funds, indicators
Comparative Relative Strength and for the indicator to reverse course to confirm the move. www.decisionpoint.com
MACD
MACD Histogram
Momentum The percent R has been known to be very good at reversing a few days before prices do (i.e. it peaks a few
On Balance Volume (OBV) days before a top is achieved and bottoms a few days before the underlying reverses). But it is not Company
uncommon for an overbought or oversold indicator to stay overbought or oversold for a long period of time, Stock
Relative Strength Index (RSI) so one needs to study the history of the percent R with a stock to determine its tendencies. Research
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Here is a simple example as to how Percent R can be used as an overbought or oversold indicator. After a big rally in June and
Analyst Reports &
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Here is an example many false sell signals being given by Percent R. No indicator works all the time, and some indicators work
better with some stocks than others. The prudent trader never blindly relies on any one technical indicator.
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Chart Patterns | Candlestick Patterns | Technical Analysis | OPTION STRATEGIES | Bookshelf
Option Strategies
Options are a popular vehicle traders/investors use with regards to pulling money from the market. There are
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in NIFTY
Here we discuss numerous option trading strategies that are typically used by successful option traders. Unless You Read
this, Double Your
Bullish Strategies Neutral Strategies Bearish Strategies Investment within
Long Calls The Collar Long Puts 6 Months.
Covered Calls Long Straddle Naked Calls ApnaNifty.com
Bull Call Spread Short Straddle Put Back Spread
Bull Put Spread Long Strangle Bear Call Spread
Call Back Spread Short Strangle Bear Put Spread Online Stock
Naked Put Long Butterfly Covered Put Trading
Long Condor Trade stocks
online with no
fees free charts,
Recommended Reading
Free Demo
Account
www.gcitrading.com
Trader Makes
$18 Billion
California trader
McMillan on Options Options as a Strategic The Options DeMark On Day Trading Options makes $18 Billion
by Lawrence G. Investment Advisor by Thomas DeMark and Thomas in a single year!
McMillan by Lawrence McMillan by Bernie DeMark, Jr. Find out How
Schaeffer www.VirtualinvestingClub
Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology


Long Calls Long Calls send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: limited Nifty Trading
Call Back Spread Reward: potentially very high Made Easy
Naked Put
Gains of 300-700
General Description Points per month
Neutral Patterns
The Collar
Entering a long call position simply entails buying call options…preferably ones that are in-the-money. Get the best calls
Long Straddle in Nifty Future
Short Straddle
The Thinking calloptionputoption.com
Long Strangle
Short Strangle If you are very bullish a stock, you can buy the stock or you can buy a call option which grants you many of the
Long Butterfly same benefits of owning the stock at a fraction of the cost. But what you gain in leverage you lose with time.
Long Condor
Whereas a stock can be held indefinitely, options have an expiration date. So the stock doesn't just need to do Online Share
what you think it will do, it needs to do it within a specified time frame. Trading
Bearish Patterns Trade shares
Long Puts
Naked Calls Example online with no
Put Back Spread Let's say MSFT is trading @ 55, and you think it will rally in the next few weeks. You could buy 1000 shares for fees free charts,
Bear Call Spread
Bear Put Spread $55,000, but instead you buy (10) 55 call options for $2.50 ($2500) that expire next month. Free Demo
Covered Put Account
www.gcitrading.com
If the stock rallies to 57.5, you will break even. For every point above 57.5, you will profit $1,000, so a huge
rally could bring you a huge profit (remember we said you get the benefit of owning the stock without actually
buying it). If the stock goes nowhere, the calls will expire worthless and you will lose your entire investment.
What is a
Your max profit is theoretically unlimited because the stock can rally indefinitely, and your max loss is locked in
derivative?
place as your initial capital outlay.
Answer all your
stock market
The image below summarizes the trade with a P/L Diagram.
questions with
First Step.
90% sure shot

Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
calloptionputoption.com
Online Share
Trading
Trade shares
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
What is a
derivative?
Answer all your
stock market
questions with
First Step.
90% sure shot
Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com

Long Calls Covered Calls send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Trade MT4-
Call Back Spread Reward: low Regulated Firm
Naked Put
EA hosting,
General Description customizable
Neutral Patterns charting Trade on
The Collar
Buying covered calls typically entails selling out-of-the-money call options on stocks that you own.
Long Straddle any OS - MAC or
Short Straddle
The Thinking PC
Long Strangle www.FOREX.com/Metatr
Short Strangle This strategy is employed when you are the proud owner of a stock that you do not wish to sell but would like
Long Butterfly to earn “residual” income from. You sell out-of-the-money calls, and as long as the stock doesn't rally above
Long Condor
the strike price, you keep the premium collected when you sold the calls and you remain in possession of the Stock Market
stock. Then you can do it again. Winners
Bearish Patterns Learn techniques
Long Puts
Naked Calls Example from the current
Put Back Spread You have been a long time stockholder of 1000 shares of DIS and wish to hold for many more years. DIS is World Record
Bear Call Spread
Bear Put Spread currently trading at 24.4, and while you are bullish, you don't think the stock will rally too much in the next few Holder in the
Covered Put weeks. Sell (10) 27.5 calls that expire next month for $0.90 ($900). market.
As long as the stock closes below 27.5 on expiration day, you keep the $900 and the stock. But if the stock
rallies above 27.5, the call options will be in-the-money, and you will have a decision to make. You will need to
Trader Makes
either buy the calls back and therefore make less money or possibly incur a loss, or you can simply let the
$18 Billion
stock get “called” from you.
California trader
makes $18 Billion
Remember, when you buy a call, you have the right to buy the stock at a given price. But when you sell a call,
in a single year!
you are essentially granting someone else the right to buy your stock at a given price. There is very little risk
Find out How
involved because if the stock drops, you keep the premium, and you were planning on keeping the stock www.VirtualinvestingClub
anyway. The possible drawback is, if the stock rallies beyond the strike price, you don't get to participate in the
price appreciation.
Nifty Trading
The image below summarizes the trade with a P/L Diagram. The max gain is calculated assuming you bought
Made Easy
the stock at 24.4 and it was called from you at 27.5. You'd make 3.10 on the stock and 0.90 on the option for a
Gains of 300-700
total of 4 points.
Points per month
Get the best calls
in Nifty Future
Online Share
Trading
Trade shares
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
90% sure shot
Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com


Long Calls Bull Call Spread send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Do Not Trade
Call Back Spread Reward: low in NIFTY
Naked Put
Unless You Read
General Description this, Double Your
Neutral Patterns
The Collar
Entering a bull call spread position entails buying a call option (preferably in-the-money) and selling an out-of- Investment within
Long Straddle the-money call option. 6 Months.
Short Straddle
ApnaNifty.com
Long Strangle
Short Strangle The Thinking
Long Butterfly This strategy is employed when you are generally bullish but don't think the stock will rally too much.
Long Condor
Essentially you are buying calls because you think the underlying issue will rally, but since you don't think it will
Options
rally too much, you sell an out-of-the-money call to lower your risk by locking in your max loss at a lower price. strategies
Bearish Patterns
Long Puts Virtually Eliminate
Naked Calls Slippage Trade
Put Back Spread Example with SmartOrder
Bear Call Spread
Bear Put Spread Let's say DELL is trading @ 26.85. You are bullish and think the stock will rally a few points, but you don't think Technology
Covered Put it will catapult higher. You buy the 25 (in-the-money) calls for $2.95 and sell the 30 (out-of-the-money) calls for www.vankartrading.com
$0.50.
Selling the calls reduces your risk because you max loss is locked in place at a lower price than if you had only
bought the calls. In exchange for wanting lower risk, you forego whatever profits you would have enjoyed if the Interest Rates
stock rallies above 30. Your max profit occurs at 30; above 30 the long and short call positions will cancel each System
other out. You max loss is locked in place at the onset. It is the amount you paid for the 25 calls minus the Accurate, realtime
premium collected from selling the 30's. market prices for
all IR options.
The image below summarizes the trade with a P/L Diagram. Free Trial
www.SuperDerivatives.co
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Option
Calculators
Assess the Risk of
Derivatives.
Download
FINCAD Analytics
Suite
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Exotic Options
Pricing
Pricing all kinds of
Exotic Options in
all Asset Classes.
Free Trial
Do Not Trade
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Unless You Read
this, Double Your
Investment within
6 Months.
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What is a
derivative?
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First Step.
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Long Calls Bull Put Spread send to a friend
Covered Calls
Bull Call Spread
Naked Put
Unless You Read
Neutral Patterns
The Collar
Entering a bull put spread position typically entails selling in-the-money puts and buying out-of-the-money Investment within
Long Straddle puts. 6 Months.
Short Straddle
ApnaNifty.com
Long Strangle
Long Butterfly This strategy is employed when you are bullish and like the idea of selling puts (rather than buying calls) but
Long Condor
would also like a little downside protection just in case the underlying issue drops.
What is a
Bearish Patterns derivative?
Example Answer all your
Long Puts
Naked Calls Let's say KO is trading @ 54.14 and you think it will rally. You like the idea of selling puts rather than buying stock market
Put Back Spread calls so you sell the 55 puts for $2.55. This is the naked put strategy , but you want a little downside protection questions with
Bear Call Spread
Bear Put Spread just in case the stock declines. You then buy the 50 puts for $0.85. First Step.
Covered Put
Your max profit is locked in place at the onset and occurs above 55. That's where all puts will expire worthless
and your profit is the premium collected from your short put position minus the cost of the long puts. You max
loss occurs at 50. This is where the long put position will expire worthless and the short put position will be
$4 Billion Wiz
worth $5. You will then either have to buy back your short puts at a greater price than what you paid, or the
Kid
stock will be “put” to you (i.e. you will be forced to buy it) at $55.0. Below 55, your long and short positions
Santa Monica Wiz
cancel each other out.
Kid makes $4
Billion Trading
Stock Options!
Options
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this, Double Your
Investment within
6 Months.
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What is a
derivative?
Answer all your
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First Step.
Trader Makes
$18 Billion
California trader
makes $18 Billion
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Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology

Long Calls Call Back Spread send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Option
Call Back Spread Reward: potentially high Calculators
Naked Put
Assess the Risk of
General Description Derivatives.
Neutral Patterns Download
The Collar
Entering a call back spread typically entails selling in-the-money calls and buying a greater number of out-of-
Long Straddle the-money calls. FINCAD Analytics
Short Straddle Suite
Long Strangle www.fincad.com
Long Butterfly This strategy is employed when you are bullish on a volatile stock but want to lower your risk. You buy calls
Long Condor
because you are bullish, but then you sell a lower strike price call to lower your risk. This offsets your loss if the
Do Not Trade
stock moves lower. The drawback comes if the stock fails to move or rallies big. One of your long calls will be in NIFTY
Bearish Patterns canceled out by your short call, so your profit potential is lowered.
Long Puts Unless You Read
Naked Calls this, Double Your
Put Back Spread Example Investment within
Bear Call Spread
Bear Put Spread Let's say IP is trading @ 43.46 and you think it will rally. Buy (2) 45 calls for $1.05 and then sell (1) 40 call for 6 Months.
Covered Put $4.00. Your credit from initiating the trade is $190. ApnaNifty.com
If the stock closes below 40, all calls will expire worthless and you keep the $190.0. Your greatest loss occurs
at 45. The long 45 calls will expire worthless and the 40 calls which you sold for 4 will need to be bought back
Interest Rates
at 5. Above 45, you will only make money on one of the long calls because the other one will be canceled out
System
by your short call.
Accurate, realtime
market prices for
all IR options.
Free Trial
Online Stock
Trading
Trade stocks
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
Online Stock
Trading
Trade stocks
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
90% sure shot

Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Options trading
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
90% sure shot

Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com
Share Market
Free Tips
Expertise ,
Brokers View Just
join Free Today
Options trading
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How


Long Calls Naked Put send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: high Option
Call Back Spread Reward: limited Calculators
Naked Put
Assess the Risk of
Neutral Patterns Download
The Collar
Entering a naked put position entails selling puts (most likely in-the-money).
Long Straddle FINCAD Analytics
Short Straddle
The Thinking Suite
Long Strangle www.fincad.com
Short Strangle This strategy is employed when you are very bullish. If the stock rallies above the strike price you keep the
Long Butterfly entire premium, but you have huge risk to the downside if the stock drops. You would then have to either buy
Long Condor
the puts back at a much higher price or the stock would get “put” to you, and you would show an immediate
Do Not Trade
Bearish Patterns
loss. in NIFTY
Long Puts Unless You Read
Naked Calls Example this, Double Your
Put Back Spread Let's say IBM is trading @ $82.83 and you think a big rally is coming soon. You sell the 80 put options for
Bear Call Spread Investment within
Bear Put Spread $5.10. 6 Months.
Covered Put
ApnaNifty.com
Your max profit is the premium collected from selling the puts. As long as the stock closes above 80, you keep
the entire premium. Simple as that. Your breakeven point is 74.9 – at that price the 80 puts will be worth $5.10
(80.0 – 74.9). Below 74.9 you will lose money at the same rate as if you owned the stock. You will then have to
Nifty Trading
buy the puts at a much higher price or let the stock be “put” to you at $80/share and show an immediate loss.
Made Easy
Between 74.9 and 80 you will have a profit but less than the max.
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
Options
strategies
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
Options
strategies
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Online Stock
Trading
Trade stocks
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com

Long Calls The Collar send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: limited Online Share
Call Back Spread Reward: limited Trading
Naked Put
Trade shares
General Description online with no
Neutral Patterns
The Collar
The collar entails buying an out-of-the-money put and selling an out-of-the-money call of a stock you own and fees free charts,
Long Straddle want to hold. Free Demo
Short Straddle Account
Long Strangle www.gcitrading.com
Long Butterfly You own a stock and would like to hold it but would like to protect yourself to the downside. Essentially you are
Long Condor
buying a put to protect yourself in case the stock drops, and you sell a call to help pay for the put. The put will
Nifty Trading
Bearish Patterns
protect you on the downside, but if the stock rallies you won't participate beyond the strike price of the call. Made Easy
Long Puts Gains of 300-700
Naked Calls Example Points per month
Put Back Spread Let's say you are the proud owner of 100 shares of NTAP which is currently trading @ 12.84. You plan on
Bear Call Spread Get the best calls
Bear Put Spread holding the stock but think it may fall in the short term. Buy the (1) 10 put for $0.60 ($60.0) and sell the (1) 15 in Nifty Future
Covered Put call for $0.80 ($80.0). calloptionputoption.com
The call you sold pays for the put (i.e. the call pays for downside protection). If the stock drops below 10 you
will lose, but at least your loss will be minimized by the put option. If the stock rallies, you will make money on
the long stock position, but above 15 the long stock position will be canceled out by the short call position. Do Not Trade
in NIFTY
The image below summarizes the trade with a P/L Diagram. Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
Share Market
Free Tips
Expertise ,
Brokers View Just
join Free Today
Online Share
Trading
Trade shares
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
90% sure shot
Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com

Long Calls Long Straddle send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: medium Do Not Trade
Call Back Spread Reward: high in NIFTY
Naked Put
Unless You Read
Neutral Patterns
The Collar
Entering a long straddle entails buying at-the-money calls and puts at the same strike price. Investment within
Long Straddle 6 Months.
Short Straddle
The Thinking ApnaNifty.com
Long Strangle
Short Strangle You are not bullish or bearish but you do think a big move is coming soon. If the stock rallies huge, the puts will
Long Butterfly expire worthless and you will profit from the calls. If the stock drops big, the opposite will be true. But you need
Long Condor
a big move; if the underlying stock just sits there, both the calls and puts will rapidly deteriorate in value.
Nifty Trading
Bearish Patterns Made Easy
Example Gains of 300-700
Long Puts
Naked Calls Let's say MMM is trading @ 95. You buy the 95 calls and the 95 puts for $7 each for a total cost of $14. For Points per month
Put Back Spread you to make money, the stock must either drop below 81 (95-14) or rally above 109 (95+14). If the stock
Bear Call Spread Get the best calls
Bear Put Spread closes anywhere between 81 and 109 you will lose money with your max loss occurring at 95. So again, you in Nifty Future
Covered Put need a big move one way or the other. calloptionputoption.com

Online Stock
Trading
Trade stocks
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
90% sure shot

Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
Nifty Trading
Made Easy
Gains of 300-700
Points per month
Get the best calls
in Nifty Future
Online Stock
Trading
Trade stocks
online with no
fees free charts,
Free Demo
Account
www.gcitrading.com
90% sure shot
Intra-Day
Trade on sure
short calls in cash
futures and make
money from
stocks
www.SnpNifty.com
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Share Market
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Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How
Mini-charts -
free trial
Show quote
history with mini-
charts in Excel
cells - try
SparkMaker
www.bissantz.de/en
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Share Market
Free Tips
Expertise ,
Brokers View Just
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Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How
Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology


Long Calls Short Straddle send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: high Do Not Trade
Call Back Spread Reward: medium in NIFTY
Naked Put
Unless You Read
Neutral Patterns
The Collar
Entering a short straddle entails selling at-the-money calls and puts at the same strike price. Investment within
Long Straddle 6 Months.
Short Straddle
The Thinking ApnaNifty.com
Long Strangle
Short Strangle You are not bullish or bearish and you feel fairly certain the stock will not move much from its current position.
Long Butterfly You sell calls and puts and will keep most of the premium as long as the underlying issue trades sideways. But
Long Condor
if the stock takes off in either direction your risk is huge because you have no protection.
What is a
Bearish Patterns derivative?
Example Answer all your
Long Puts
Naked Calls Let's say IBM is trading @ 80. You sell the 80 calls and puts for $6 each for a total cost of 12. If the stock stock market
Put Back Spread closes at 80, both legs of the straddle will expire worthless and you keep the premium collected from both. To
Bear Call Spread questions with
Bear Put Spread profit the stock must either close above 68 (80-12) or below 92 (80+12). But if the stock falls below 68 your First Step.
Covered Put naked put position will increase in value point for point as the stock falls, and if the stock rallies above 92 your ShareKhan-FirstStep.com
naked call position will increase in value point for point as the stock rallies. So you need the stock to stay
pretty close to home.
Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How
Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Do Not Trade
in NIFTY
Unless You Read
this, Double Your
Investment within
6 Months.
ApnaNifty.com
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Share Market
Free Tips
Expertise ,
Brokers View Just
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Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How

Long Calls Long Strangle send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: medium Interest Rates
Call Back Spread Reward: very high System
Naked Put
Accurate, realtime
General Description market prices for
Neutral Patterns
The Collar
Entering a long strangle entails buying out-of-the-money calls and puts. all IR options.
Long Straddle Free Trial
Short Straddle
The Thinking www.SuperDerivatives.co
Long Strangle
Short Strangle You are not bullish or bearish but you do think a big move is coming soon. If the stock rallies huge, the puts will
Long Butterfly expire worthless, and you could profit from the calls. If the stock drops, the opposite will be true. But you need
Long Condor
a big move; if the underlying stock just sits there, both the calls and puts will rapidly deteriorate in value.
Share Market
Bearish Patterns Example Free Tips
Long Puts
Naked Calls Let's say PG is trading @ 65 and you think a big move is coming. You buy the 70 calls for 3.9 and the 60 puts Expertise ,
Put Back Spread puts for 4.1 for a total debit of 8.0. If the stock rallies above above 78, the puts will expire worthless, but your Brokers View Just
Bear Call Spread
Bear Put Spread calls will more than make up for it, and you'll profit on the entire trade. If the stock drops below 52, the calls will join Free Today
Covered Put niftyexpress.blogspot.com
expire worthless, but your puts will more than make up for it, and you'll turn a profit. So, like the long straddle,
you must get a big move in one direction or the other or else your calls and puts will deteriorate in value and
you'll incur a loss on the trade..
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How
What is a
derivative?
Answer all your
stock market
questions with
First Step.
Share Market
Free Tips
Expertise ,
Brokers View Just
join Free Today
Trader Makes
$18 Billion
California trader
makes $18 Billion
in a single year!
Find out How
Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Options
Virtually Eliminate
Slippage Trade
with SmartOrder
Technology
Mini-charts -
free trial
Show quote
history with mini-
charts in Excel
cells - try
SparkMaker
www.bissantz.de/en
Where are
stocks
headed?
The answer may
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Long Calls Short Strangle send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: high Nifty Trading
Call Back Spread Reward: limited Made Easy
Naked Put
Gains of 300-700
Neutral Patterns
The Collar
Entering a short strangle entails selling out-of-the-money calls and puts. Get the best calls
Short Straddle
Long Strangle
Short Strangle You are not bullish or bearish and you feel fairly certain the stock will not move much from its current position.
Long Butterfly You sell calls and puts (essentially you are using a naked call and naked put position at the same time) and
Long Condor
will keep most of the premium as long as the underlying issue trades sideways. But if the stock takes off in Online Stock
either direction your risk is huge because you have no protection. Trading
Bearish Patterns Trade stocks
Long Puts
Put Back Spread Let's say OMC is trading @ 65, and you sell the 70 calls for 2.4 and sell the 60 puts for 2.6 for a total credit of fees free charts,
Bear Call Spread
Bear Put Spread 5.0. If the stock closes anywhere between 60 and 70, both legs of the strangle will expire worthless and you Free Demo
Covered Put keep the premium collected from both. But if the stock closes below 55 (calls expires worthless and naked put Account
www.gcitrading.com
incurs a loss) or above 75 (puts expire worthless but naked call incurs a loss) you will lose money and your
loss gets grows for every tick beyond the 55-75 range the stock moves.
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Long Calls Long Butterfly send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Expert Advisor
Call Back Spread Reward: low Hosting
Naked Put
With Forex.comÂ®
General Description Registered FCM
Neutral Patterns
The Collar
Entering a long butterfly entails buying 1 call at a lower strike price, selling 2 calls at a middle strike price, and Micro lots, tight
Long Straddle buying 1 call at a higher strike price. The middle strike is midway between the higher and lower strikes. spreads, hedging
Short Straddle Essentially the long butterfly is a combination of the bull call spread and bear call spread. www.FOREX.com/Metatr
Long Strangle
Short Strangle
Long Butterfly The Thinking
Long Condor
You are not bullish or bearish and you feel fairly certain the stock will not move much from its current position.
Do Not Trade
Bearish Patterns
Because you think the stock will trade sideways you sell calls. If the stock doesn't move the calls would in NIFTY
deteriorate in price and you would make money. But at this point you are naked and have huge exposure to Unless You Read
Long Puts
Naked Calls the upside, so you buy the calls at the lower and higher strike prices. This limits your reward because you are this, Double Your
Put Back Spread locking in your max profit at a lower price, but it also limits your risk in case the stock rallies. This strategy is not
Bear Put Spread recommended by those who trade small position sizes because commissions will kill you. This strategy is best 6 Months.
Covered Put used by those looking to make small amount of money multiplied by a large position size. ApnaNifty.com
Example
Let's say CAT is trading @ 65, and you buy (1) 60 call for 5.5 and (1) 70 call for 0.50, and you sell (2) 65 calls Trader Makes
for 2.25 for a net debit of 1.5.. $4 Billion
Wiz Kid Stock &
Max profit occurs when the stock closes at 65 – the short calls expire worthless; you keep the entire premium; Option Trader
the long 60 call gets sold for a for a small profit; and the long 70 call expires worthless. Your max loss is Makes $4 Billion
locked in place at the onset and will occur if the stock closes below 60 (all calls expire worthless) or above 70 Trading Stock
(long and short calls will all cancel each other out). Options!
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Long Calls The Condor send to a friend
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Bull Call Spread
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General Description Registered FCM
Neutral Patterns
The Collar
The condor is a butterfly stretched over 4 strike prices instead of 3. Entering a condor entails selling calls at Micro lots, tight
Long Straddle two consecutive strike prices (this forms the “body”) and then buying a call above and below the body. The spreads, hedging
Short Straddle condor is a combination of a bull call spread and a bear call spread. www.FOREX.com/Metatr
Long Strangle
Short Strangle
Long Butterfly The Thinking
Long Condor
You are not bullish or bearish and you feel fairly certain the stock will not move much from its current position.
Do Not Trade
Bearish Patterns
As with the butterfly, this strategy is not recommended by those who trade small position sizes because in NIFTY
commissions will kill you. This strategy is best used by those looking to make small amount of money Unless You Read
Long Puts
Naked Calls multiplied by a large position size. this, Double Your
Put Back Spread
Bear Put Spread Example 6 Months.
Covered Put Let's say IBM is trading @ 75, and you sell the 75 and 80 calls for 2.5 and 1.0, and you buy the 70 and 85 ApnaNifty.com
calls for 6.0 and 0.50 for net debit of 3.0.
If the stock closes at 75, the 75, 80 and 85 calls expire worthless and the 70 calls would be worth 5.0.The 5-
point gain vs. the 3-point debit to initiate the trade gives you a profit of 2.0. Trader Makes
$18 Billion
If the stock closes at 80, the 80 and 85 calls would expire worthless, and the 5 point loss in the short 75 call California trader
position would be canceled out with the 10 point gain of the 70 calls, so your net is still 5.0 and your profit is makes $18 Billion
still 2.0. This is your max gain. It occurs anywhere between 75 and 80. in a single year!
Find out How
Your profit declines above 80 and below 75 with the max loss occurring above 85 and below 70, but your max www.VirtualinvestingClub
loss is locked in as the initial cost of the trade.
The image below summarizes the trade with a P/L Diagram. What is a
derivative?
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Long Calls Long Puts send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: limited
Call Back Spread Reward: very big Option Calculators
Naked Put
Assess the Risk of
Neutral Patterns Download FINCAD
The Collar
Entering a long put position simply entails buying put options…preferably ones that are in-the-money.
Long Straddle Analytics Suite
The Thinking
Short Straddle www.fincad.com
Long Strangle
Short Strangle If you are very bearish a stock, you can short the stock or buy a put option which grants you the right to sell the
Long Butterfly stock at a predetermined fixed price. But what you gain in leverage you lose with time. Whereas a short stock
Long Condor
position can theoretically be held indefinitely, options have an expiration date. So the stock doesn't just need to
Real-Time Share
drop like you expect, it needs to do it within a specified period of time.
Bearish Patterns Quotes
Long Puts Free share prices,
Naked Calls Example
Put Back Spread
online trading.
Let's say CSCO is trading @ 16.07, and you think it will suffer a big drop in the next few weeks. You could
Bear Call Spread North American and
Bear Put Spread short 1000 shares for $16,070, but instead you buy (10) 15 put options for $0.55 ($550) that expire next month
European shares.
Covered Put
www.gcitrading.com/share-
If the stock drops to 14.45, you will break even. For every point below 14.45, you will profit $1,000, so a huge
collapse would bring you a huge profit (remember we said you get the benefit of being short without actually
being short). If the stock closes above 15, the puts will expire worthless, and you will lose your entire
investment. A closing price between 14.45 and 15.0 will get you some, but not all of your money back. Your Options
max profit occurs if the stock drops to 0; your max loss is locked in place as your initial capital outlay. Virtually Eliminate
Slippage Trade with
The image below summarizes the trade with a P/L Diagram. SmartOrder
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Long Calls Naked Calls send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: high Increase
Call Back Spread Reward: limited Monthly
Naked Put
Income.
General Description $250K+ Realistic
Neutral Patterns Income. Create
The Collar
Entering a naked call position entails selling calls.
Long Straddle Multiple Streams
Short Straddle
The Thinking Of Income Online.
Long Strangle www.LindaMiner.net
Short Strangle This strategy is employed when you are very bearish. If the stock closes below the strike price on expiration
Long Butterfly day, you keep the entire premium. But if the stock rallies, you have unlimited loss potential to the upside
Long Condor
because by selling calls you are granting someone else the right to “call” the stock from you at a
Do Not Trade
Bearish Patterns
predetermined price (the strike price). So if the stock rallies and the option buyer exercises the call, you will be in NIFTY
forced to buy the stock in the open market at a high price and then immediately turn around and sell the stock Unless You Read
Long Puts
Naked Calls at the lower strike price. Obviously naked calls carry very high risk, and most traders will not be approved by this, Double Your
Put Back Spread their broker to enter such a position.
Bear Put Spread 6 Months.
Covered Put Example ApnaNifty.com
Let's say IBM is trading @ 83.10. You sell the 90 calls for $1.35.
If the stock closes below 90 on expiration day you keep the entire premium and your max profit scenario will Trader Makes
be realized. A stock price between 90.0 and 91.35 (90.0 + 1.35) will get you some, but not all of your money $4 Billion
back. Above 91.35, your loss grows as the stock moves up. Wiz Kid Stock &
Option Trader
The image below summarizes the trade with a P/L Diagram. Makes $4 Billion
Trading Stock
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Answer all your
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Long Calls Put Back Spread send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Increase
Call Back Spread Reward: moderate Monthly
Naked Put
Income.
General Description $250K+ Realistic
Neutral Patterns
The Collar
Entering a put back spread typically entails selling a put at a higher strike price and buying a greater number of Income. Create
Long Straddle puts at a lower strike price. Multiple Streams
Short Straddle Of Income Online.
Long Strangle www.LindaMiner.net
Long Butterfly This strategy is employed when a big down moved is expected in a volatile stock but you want to lower your
Long Condor
risk. You buy puts because you are bearish, but then you sell a higher strike price put to lower your risk. This Online Stock
lowers your max loss in place at a lower price. The drawback comes in the stock collapses. One of your long Trading
Bearish Patterns puts will be canceled out by your short put, so you profit potential is lowered. Trade stocks
Long Puts
Naked Calls online with no
Put Back Spread Example fees free charts,
Bear Call Spread
Bear Put Spread Let's say INTC is trading @ 30.06 and you think the stock will drop. Buy (2) 30 puts for 1.25 and then sell (1) Free Demo
Covered Put 32.5 put for 2.70. Your net credit from initiating the trade is 0.20. Account
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If the stock closes above 32.5, all puts will expire worthless and you keep the $20. Your greatest loss is $230
and occurs at 30. This is where the long 30 puts will expire worthless (a $250 loss) and your 32.5 put will be
Trader Makes
worth $20 (sold it for 2.7 and bought it back 2.5). Below 30 you will start getting some of your money back and
$18 Billion
below 27.7 your profit increases to a max when the stock drops to zero. But you will only make money on one
California trader
of the long puts because the other one will be canceled out by your short put.
makes $18 Billion
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Long Calls Bear Call Spread send to a friend
Covered Calls
Bull Call Spread
Naked Put
Unless You Read
Neutral Patterns
The Collar
Entering a bear call spread position typically entails selling at-the-money calls and buying out-of-the-money Investment within
Long Straddle calls. 6 Months.
Short Straddle
ApnaNifty.com
Long Strangle
Long Butterfly This strategy is employed when you are generally bearish but want a little upside protection. Essentially you
Long Condor
are selling naked calls but then protecting yourself by buying out-of-the-money calls just in case the stock
Interest Rates
Bearish Patterns
rallies. System
Long Puts Accurate, realtime
Naked Calls Example market prices for
Put Back Spread Let's say QQQQ is trading @ 30.11. You are bearish and think the stock will fall, but want some upside
Bear Call Spread all IR options.
Bear Put Spread protection just in case it doesn't. Sell the 30 calls (you are naked); then buy the 32 calls for some upside Free Trial
Covered Put protection. www.SuperDerivatives.co
If the stock drops below 30 as you expect all calls (long and short) will expire worthless and you will profit
because the premium collected from selling the 30 calls was greater than what you paid for the 32 calls. Your
$4 Billion Wiz
max loss occurs at 32 where the 30 calls will have to be bought back at a higher price than what you paid and
Kid
32 calls expire worthless. Above 32, the long and short calls will cancel each other out.
Santa Monica Wiz
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Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Online Stock
Call Back Spread Reward: low Trading
Naked Put
Trade stocks
General Description online with no
Neutral Patterns fees free charts,
The Collar
Entering a bear put spread typically entails buying in-the-money puts and selling out-of-the-money puts.
Long Straddle Free Demo
Short Straddle
The Thinking Account
Long Strangle www.gcitrading.com
Short Strangle This strategy is employed when you are bearish but don't think the stock will crash. Essentially you are buying
Long Butterfly puts as you normally would in a long put play, but since you don't think the stock will crash, you sell out-of-the-
Long Condor
money puts for a little extra cash.
Options
Bearish Patterns strategies
Example Virtually Eliminate
Long Puts
Naked Calls Let's say MO is trading at @ 56.89, and you buy the 60 puts for 3.5 (because you think the stock will move Slippage Trade
Put Back Spread down) and then sell the 50 puts for 0.50 (because you don't think the stock will fall below this level). If the stock with SmartOrder
Bear Call Spread
Bear Put Spread falls as you expect, you will make money on the 60 puts, and as long as the stock stays above 50, you keep Technology
Covered Put the entire premium for selling the 50 puts. Your max profit occurs at 50 and below; this is where the long and www.vankartrading.com
short positions cancel each other out. Your max loss occurs above 60 – all puts will expire worthless and your
loss will be the initial capital necessary to enter the position.
90% sure shot
The image below summarizes the trade with a P/L Diagram. Intra-Day
Trade on sure
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www.SnpNifty.com
What is a
derivative?
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Trader Makes
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Long Calls Covered Put send to a friend
Covered Calls
Bull Call Spread
Bull Put Spread Risk: low Nifty Trading
Call Back Spread Reward: low Made Easy
Naked Put
Gains of 300-700
Neutral Patterns
The Collar
Buying covered puts typically entails selling out-of-the-money put options on stocks that you are short. Get the best calls
Short Straddle
Long Strangle
Short Strangle This strategy is employed when you are short and plan to stay short but you'd like to earn “residual income”
Long Butterfly from your position. You sell out-of-the-money puts and will keep the entire premium as long as the stock
Long Condor
closes above the strike price. If the stock does close below the strike price the stock will be “put” to you andOnline Share
then your long and short positions will essentially cancel each other out. Trading
Bearish Patterns Trade shares
Long Puts
Put Back Spread You are short 1000 shares of DELL @ 38 and plan on holding because you think the stock has a long ways to fees free charts,
Bear Call Spread
Bear Put Spread go on the downside. But while you are waiting, you'd like to earn a little “residual income” from your holding. Free Demo
Covered Put You sell the (10) 32.5 puts. Account
www.gcitrading.com
As long as the stock closes above 32.5, the puts expire worthless and you keep the entire premium collected.
But if the stock closes below 32.5, the stock will be “put” to you. You will then be long and short the same 90% sure shot
stock, and they will cancel each other out. You have no risk. If the stock rallies, you keep the premium and Intra-Day
remain short (you were planning on staying short anyways). The drawback comes if the stock falls below the Trade on sure
strike price – you will not participate in any price drop below 32.5. short calls in cash
futures and make
The image below summarizes the trade with a P/L Diagram. money from
stocks
www.SnpNifty.com
Trader Makes
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Wiz Kid Stock &
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Makes $4 Billion
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Options!
Nifty Trading
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Gains of 300-700
Points per month
Get the best calls
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Trading
Trade shares
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Bearish Patterns Expert Advisor

http://www.leavittbrothers.com/education/chart_patterns/pennant_bullish.cfm[3/12/2009 10:51:29 AM]

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Dow Jones 100

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http://www.leavittbrothers.com/education/chart_patterns/wedge_bullish.cfm[3/12/2009 12:34:17 PM]

Free Java DAO

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volume surged on the breakout. Pretty simple.

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