THE HAnDbook of TECHniCAl AnAlysisSome examples of commonly used signals are:■ (^) Divergences between price and overlays
■ (^) Divergences between price and oscillators
■ (^) Divergences in phase between similar oscillators
■ (^) Divergences between different oscillators
■ (^) Intermarket divergence
■ (^) Specific bullish or bearish price formations (such as shooting stars, head and
shoulders, catapults, etc.)
■ (^) Oscillator signal line crossovers
■ (^) Oscillator zero and 50 percent level crossovers
■ (^) Oscillator chart pattern violations
■ (^) Oscillator overbought/oversold (OBOS) level tests or breaches
■ (^) Oscillator overlay tests or breaches (e.g., Bollinger Band on RSI)
■ (^) Specific algorithmic sequences and counts that set up a bullish or bearish con-
dition or identify exhaustion in price (e.g., Tom DeMark’s TD Sequential)
■ (^) Bullish or bearish indications derived from Sentiment, Market Breadth, Statis-
tical, Seasonal, and Behavioral indicators, and similar
■ (^) Projected cycle lows and highs
■ (^) Bullish or bearish price triggers occurring in related or closely correlated
markets
26.5.3 price Objectives or targets
Price objectives or targets are predetermined price levels at which a trader exits
from long and short positions in the market. They are popularly referred to as a
take profit level where a position is normally exited via a:
■ (^) Buy or sell limit order (upon triggering the take profit level)
■ (^) Buy or sell stop order (upon triggering the protective stoploss)
Price targets may be based on a simple test of support and resistance, or de-
rived using various forms of price projection based on chart patterns, Fibonacci
ratios, Gann levels, money management, or on important historical and psycho-
logical price levels. Even though market participants usually use price to trigger
a profit exit, signals may also be used, especially in conjunction with a protective
stop.
Some examples of price objectives or targets include:
■ (^) Chart‐pattern based 1:1, 2:1, and 3:1 price target projections (typically based
on the chart pattern’s height)
■ (^) Reward to risk ratio (R/r ratio) based profit target projections
■ (^) Technically significant price levels such as previous support and resistance
levels
■ (^) Technical barriers to price in the form of overlay targets such as moving aver-
ages, trend lines, channel tops and bottoms, Ichimoku clouds, Fibonacci and
Gann levels, and fans