Technical Analysis 101 : Session 4 Stanley Yabroff Val Alekseyev

2. Technical Analysis 101 : Session 4 Stanley Yabroff Val Alekseyev

3. Session 4 • Interpreting Trend Lines and Trend Channels • Chart Patterns • Classic Chart Interpretation

4. Classic Chart Patterns • Two types of patterns • Reversal patterns which identify changes in market trend • Key reversal • Double and triple tops and bottoms • Head and shoulder tops and bottoms • Saucer bottoms • Continuation patterns which represents midcourse corrections • Flags • Pennants • Triangles • Wedges • Volume and open interest • Confirmation of all the patterns. • Most patterns have measuring techniques which great objectives for the next move.

5. Trend Lines

6. 45 Degree Angles

7. Reversal Patterns • Common to all reversal patterns • There must be an identifiable trend. • Bottoms often have gradual basing and move with increased volume • Topping patterns are much more volatile than bottoms. • The longer the trend is in place the more substantial the reversal move. • First signal of a reversal is the violation of a trendline.

8. Patterns

9. Double and Triple Tops • Very similar to the head and shoulders top. • Triple top has three peaks and two troughs as does the head and shoulder. • The neckline connects the two troughs usually very little slope. • Breakdown is achieved by braking the neckline and testing the breakdown point and holding it. • Distance from top to neckline provides a downside objective for both double and triple top.

10. Triple & Double Bottoms

11. Double Tops, Double Bottoms M - Tops W - Bottoms

12. Double Bottoms

13. Single Tops, Single Bottoms V - Tops V - Bottoms

14. Head and Shoulders • The top formation has three high peaks with the middle peak higher than the other two. • Characteristics • The is symmetry in the shoulders either simple or complex. • Neckline can have an up or down slope. • Neckline slope is normally not very steep. • Breakout of the pattern is penetration of the neckline on high volume and a test of the neckline which must hold.

15. Head and Shoulders Source: chartpatterns.com

16. Head & Shoulder Top

17. Head & Shoulder Bottom

18. Rounded Bottom or Saucer Bottom • Saucer bottom is gradually rounding bottom. • According to Investors Business Daily, a very high percentage of stock bottom with this formation. • Bullish reversal pattern. • Price curves up to a level closed to the congestion level at the beginning of the saucer. • Retraces down to form the handle of cup and takes out the recent high with high volume to start bull move.

20. Continuation Patterns • Triangles • Symmetrical • Ascending • Descending • Flags • Pennants • Rectangular Formations

21. Symmetrical Triangle • Forms two trendlines the descending line has lower highs and the ascending line has higher lows. • Usually breaks out of the triangle in the same direction it entered the triangle. Continuation. • There are normally three waves within the triangle. • The closer the price gets to the apex of the triangle the higher the probability of a false breakout. • Volatility get lower as the trading ranges get smaller. • Volume also recedes, • The distance from the beginning of the trend to the entry into the triangle creates a profit objective upon exit from the triangle.

22. Triangles • Symmetrical Triangle • In an uptrend • Bullish Source: chartpatterns.com • Symmetrical Triangle • In Downtrend • Bearish Source: chartpatterns.com

23. Ascending Triangle • The triangle is create by horizontal top and an ascending upward trendline. • Breakout is upward through the horizontal line. • Also has a three wave count within the triangle. • Breakout should be accompanied by high volume. • Often the breakout point will be tested on a retracement and holds.

24. Triangles • Ascending Triangle • In an uptrend • Bullish Source: chartpatterns.com • Descending Triangle • In a Downtrend • Bearish Source: chartpatterns.com

25. Triangles Ascending Triangle

26. Descending Triangle • Descending triangle is created by a horizontal trendline along the bottoms and a down sloping trendline connecting highs. • Market usually enters in a downward direction and exits to the down side. Continuation pattern. • There is usually a three wave count within the triangle formation. • Breakout is normally accompanied by high volume.

27. Triangles

28. Flags and Pennants • Flags and pennants represent a rest after a sharp move. This creates the flag or pennant pole. • Pennants then form a symmetrical triangle at the top of the pole. As a continuation pattern the breakout is in the same direction as the price entered the pennant. • Flags then form a small trend channel. Bullish trend is a declining trend channel and a bearish trend forms an ascending trend channel. • Both tend to have a three wave formation, breakout with higher volume, and test the breakout point. • All trends need to take a rest, this behavior results in these continuation patterns. • Within the consolidation period volume and volatility tends to contract. Expands on breakout.

29. Flags & Pennants Source: chartpatterns.com

30. Island Bottom

31. Rectangular or Sideways Market • A rectangle is a continuation pattern in which there is a horizontal trading range where the highs and lows are at the same level. A horizontal trend channel describes the market action. • Volume and volatility consolidate within the rectangle and expands as the market exits the formation. • The rectangle can also be a high or low the key is to trade in the direction of the breakout of the trading bracket, either direction.

32. Bottom Basing / Congestion

33. Gaps

34. Stan Yabroff stan@cqg.com Val Alekseyev valekseyev@cqg.com 1 800-525-7082 www.cqg.com