The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

ChAPter 13 Chart Pattern Analysis

L e a r n i n g O b j eCt i v e s

After studying this chapter, you should be able to:

■ Understand how to identify important chart patterns and how to use them to forecast

potential reversals and continuations in the market

■ Describe the five modes of chart pattern completion including the various price filters

that are appropriate for each type of pattern completion

■ Calculate the minimum price objectives for various chart patterns

■ Distinguish between passive and aggressive trading approaches with respect to chart

patterns

C

hart pattern analysis is probably one of the most popular forms of technical

analysis. Chart patterns help to identify market tops and bottoms as well as

trend continuations. Chart patterns also indicate the minimum price movement

expected once the pattern is completed. In this chapter, we shall cover various

reversal and continuation chart patterns and their characteristics, guidelines for

pattern completion, minimum price objectives, and various trading approaches

with respect to chart patterns.

13.1 Elements of Chart Pattern Analysis

In this chapter we will be studying various chart pattern constructs, including the:

■ (^) Preconditions required for an effective and reliable chart pattern reversal or
continuation
■ (^) Minimum measuring objectives (price target projections)
■ (^) Characteristics of reversal and continuation patterns
■ (^) Expected volume action for a reliable chart pattern reversal or continuation