THE HAnDbook oF TECHnICAl AnAlysIs
4.10 Chapter suMMary
We have seen how various market phases may be determined and identified via the
application of chart patterns, moving averages, volume and open interest, cycles,
sentiment indicators, and Elliot wave analysis. We have also seen how Eastern
and Western approaches to market phase may be complementary to each other.
The ability to decipher phase transitions (i.e., market regime changes) gives the
practitioner a significant edge in the markets with regard to the most appropriate
technical tool or setup to employ. We shall now focus on the trend phase in more
detail in the next chapter.
Chapter 4 Review Questions
- Define the term consolidation.
- List eight chart patterns that are intrinsically bullish.
- Explain why the majority of chart patterns are consolidation patterns.
- Describe how you would determine if accumulation is taking place.
- Which sentiment indicators best describe distributions?
- How would you use moving averages to gauge market phase?
- Explain how you would use a cycle to determine market phase.
- How do you use divergence to identify potential consolidations?
referenCes
Frost, A. J., and Robert R. Prechter. 1999. Elliott Wave Principle. New York: John Wiley
& Sons.
Morris, Gregory. 2006. Candlestick Charting Explained. New York: McGraw‐Hill.
Murphy, John. 1999. Technical Analysis of the Financial Markets. New York: New York
Institute of Finance (NYIF).
