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Charting Lessons By TraderHugh 11/04/01
This week's quotes:
• While we stop and think, we often miss our opportunity.. Publius
Syrus 1st century B.C.
• Opportunities flit by while we sit regretting the chances we have
lost.. Jerome K Jerome, 1889
Identifying Chart Patterns
Identifying chart patterns is simply a system for predicting stock market
trends and turns! Hundreds of years of price charts have shown that prices
tend to move in trends. (I'm sure we've all heard the saying, 'the trend
is your friend'.) Well, a trend is merely an indicator of an imbalance
in the supply and demand. These changes can usually be seen by market
action through changes in price. These price changes often form meaningful
chart patterns that can act as signals in trying to determine possible
future trend development.
Research has proven that some patterns have high forecasting probabilities.
These patterns include: The Cup & Handle, Flat Base, Ascending and Descending
Triangles, Parabolic Curves, Symmetrical Triangles, Wedges, Flags and
Pennants, Channels and the Head and Shoulders Patterns. In my opinion,
these are some of the best patterns to trade. (http://www.chartpattern.com/chart_patterns.html)
Cup
& Handle
Flat
Base
Ascending
Triangle
You can see the resistance line at the top. Once this is broken thru the
stock tends to continue in that direction. Watch the volume, it's the
key!!! In any chart formation volume is the key to a successful formation,
the volume s/b 2 to 3x the dav.
Parabolic
Curve
Notice how the bottom trendline is continually adjusted
upward. In this case one could sell a portion on the way up and then sell
all remaining shares when the up trendline is broken.
Channel
Formation
Stocks in this pattern can be considered as "rollers".
Wedge
Formation
This formation gives rise to the term "apex". Typically, the b/o will
occur about 2/3 to 3/4 along the wedge. Again to be valid it must have
above average volume.
Symmetrical
Triangle
Again, wait for the stock to tell you which direction it will go.
Descending
Triangle
Notice the bottom support line.
Flags
& Pennants
Head and Shoulders
Notice the neck line doesn't have to be horizontal.
Inverted
Head and Shoulders
Again volume is important.
About chart patterns can be found at these sites
http://www.clearstation.com/education/patterns.shtml
http://www.chartpatterns.com/
http://www.equis.com/free/taaz/inttechnicalanalysis.html
http://www.chartpattern.com/chart_patterns.html
Charting sites that I find useful in charting
http://investor.stockpoint.com/
used for bar charts, they also have quick charts and interactive charts.
http://stockcharts.com/charts/SharpCharts/
used for candlesticks, basic mode and annotate mode.
http://www.clearstation.com/
http://www.equis.com/java/
Tutorial sites
http://www.google.com/search?q=%22charting+tutorial%22
http://www.google.com/search?q=%22technical+analysis%22
http://www.clearstation.com/education/cover.shtml
(one of the better ones)
http://stockcharts.com/education/index.html
Question/Answer Session
seawoof: Over what time frame/s do you generally perform
your TA?
TraderHugh: As a short term trader I look at 3 months, then
a minute chart.
nix: TH what charting service do you use for
the minute chart?
TraderHugh: For pennies I tend to use stockpoint. Because I'm
looking for support and resistance levels.
loadsa: TH: stockpoint is real time?
TraderHugh: No 15 min delayed.
loadsa: So what's the point then looking at a minute chart
on pennies which is delayed by 15 minutes?
TraderHugh: Just to give you the history of support/resistance
levels.
Join us next Sunday at 7pm EST for the next lesson
in charting.
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