Bar Chart Analysis
Figure 7.3 A Series of Price Bars Representing Each Period’s Price Activity.- The intrinsic bias or sentiment associated with the price bar formation:
■ (^) Bullish formations
■ (^) Bearish formations
- The directional expectations of the formation:
■ (^) Continuation formations
■ (^) Reversal formations
7.2 Price Bar Pattern Characteristics
Bar reversals and continuations may be classified in single, double, triple, and mul-
tiple bullish and bearish patterns. A bullish pattern in an uptrend and a bearish
pattern in a downtrend are considered to be continuations patterns. Similarly, a
bearish pattern in an uptrend and a bullish pattern in a downtrend are considered
reversal patterns. In short, whenever the:■ (^) Intrinsic and trend sentiments agree, the pattern is considered a continuation
pattern
■ (^) Intrinsic and trend sentiments disagree, the pattern is considered a reversal
pattern
We say that the trend sentiment is bullish for uptrends and bearish for downtrends.
Intrinsic sentiment is the inherent bullish or bearish bias that is associated with a par-
ticular pattern. For example, the intrinsic sentiment is bearish for a standard head
and shoulders pattern and bullish for an inverted head and shoulders pattern. Hence,
an inverted head and shoulders pattern in an uptrend is considered a continuation
pattern since the trend and intrinsic sentiment are both in agreement, that is, they are
both bullish. For more on intrinsic sentiment bias, refer to Chapter 4.
We shall now look at various generic bullish and bearish formations of single,
double, triple, and multiple bar reversal patterns. For bearish patterns, we assume