What shape are able to form price charts and what these figures mean? In the first part of the review, we started a story about the most common patterns, explained how to act when you see the figure “head and shoulders” indicates that double top or double bottom, and started talking about triangles.
Recall that noticing the appearance of a triangle on the chart, it is better to lay low and wait for its complete formation. Follow the volume of tenders: if, after the fade, he suddenly went into growth, so the figure will be breached. In the interpretation of the triangles is important to consider the direction of the preceding trend. Excluding this factor, the registration of the symmetrical triangle (as pictured above) do not reflect any useful information, as in this case, the triangle does not give a clear prediction of the price behavior.
Ascending triangle — a figure quite rare, it clearly shows the positive changes on the market. After its complete formation, it is possible to expect the increase in the price of the asset. At the same time, what was the trend before the formation of ascending triangle — ascending or descending — the situation does not change: wait for growth.
Rectangle — shape, confirming the trend. Is formed for a long time — from several weeks to several months. A rectangle is also called market corridor limited resistance line above and a support line below. To analyze this pattern should watching the trading volume indicators. Since the inside of the corridor, the price can jump quite unpredictable, it is the trading volume will tell you which way it will move after the completion of the graphical model. During an uptrend and increase in trading volume we can safely say that the price will continue to grow.
This figure is also often referred to as “diamond” or “diamond”. Typically, the model is formed on an uptrend and signals the imminent reversal. A distinctive feature of the figure is the narrowing and widening of the range of fluctuations of the asset price and parallel (in contrast to the “head and shoulders”) lines support and resistance, which ultimately forms a rhombus on the chart. The breakdown of the support line of the right face of the diamond serves as a signal to sell.
“Brilliant” is great because it helps to evaluate to what extent will drop the price of the asset. To calculate this figure, you need the right level of breakdown (point where the price breaks through the resistance line) to postpone a distance equal to the height of a rhombus. Graphically this is shown in figure. Try to practice and test the “diamond” hypothesis in practice.
This familiarity with the shapes of the charts we did not finish and the following overview will tell you what to do if the stock market throws the flag. Good trading!