The piercing pattern is made up of two candlesticks, the first black and the second white. Both candlesticks should have fairly large bodies and the shadows are usually, but not necessarily, small or nonexistent. The white candlestick must open below the previous close and close above the midpoint of the black candlestick's body. A close below the midpoint might qualify as a reversal, but would not be considered as bullish.
Just as with the bullish engulfing pattern, selling pressure forces the security to open below the previous close, indicating that sellers still have the upper hand on the open. However, buyers step in after the open to push the security higher and it closes above the midpoint of the previous black candlestick's body. Further strength is required to provide bullish confirmation of this reversal pattern.In late March and early April 2000, Ciena (CIEN)[Cien] declined from above 80 to around 40. The stock first touched 40 in early April with a long lower shadow. After a bounce, the stock tested support around 40 again in mid April and formed a piercing pattern. The piercing pattern was confirmed the very next day with a strong advance above 50. Even though there was a setback after confirmation, the stock remained above support and advanced above 70. Also notice the morning doji star in late May. - See more at: http://stocks-basics.blogspot.com/2016/10/piercing-pattern-chart-analysis.html#sthash.7mayXUnH.dpuf
The bullish engulfing pattern consists of two candlesticks, the first black and the second white. The size of the black candlestick is not that important, but it should not be a doji which would be relatively easy to engulf. The second should be a long white candlestick – the bigger it is, the more bullish. The white body must totally engulf the body of the first black candlestick. Ideally, though not necessarily, the white body would engulf the shadows as well. Although shadows are permitted, they are usually small or nonexistent on both candlesticks.
After a decline, the second white candlestick begins to form when selling pressure causes the security to open below the previous close. Buyers step in after the open and push prices above the previous open for a strong finish and potential short-term reversal. Generally, the larger the white candlestick and the greater the engulfing, the more bullish the reversal. Further strength is required to provide bullish confirmation of this reversal pattern.In Jan-00, Sun Microsystems (SUNW)[Sunw] formed a pair of bullish engulfing patterns that foreshadowed two significant advances. The first formed in early January after a sharp decline that took the stock well below its 20-day exponential moving average (EMA). An immediate gap up confirmed the pattern as bullish and the stock raced ahead to the mid-forties. After correcting to support, the second bullish engulfing pattern formed in late January. The stock declined below its 20-day EMA and found support from its earlier gap up. This also marked a 2/3 correction of the prior advance. A bullish engulfing pattern formed and was confirmed the next day with a strong follow-up advance. - See more at: http://stocks-basics.blogspot.com/2016/10/bullish-engulfing-chart-analysis.html#sthash.RiZKGbN2.dpuf
If we take this trend line theory one step further and draw a parallel line at the same angle of the uptrend or downtrend, we will have created a channel. To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak. This should be done at the same time you create the trend line. To create a down (descending) channel, simple draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley. This should be done at the same time you created the trend line. When prices hit the bottom trend line this may be used as a buying area. When prices hit the upper trend line this may be used as a selling area. - See more at: http://stocks-basics.blogspot.com/2016/10/channel.html#sthash.YrvQtbna.dpuf
Ascending and descending triangles are short-term investor favorites, because the trends allow short-term traders to earn from the same sharp price increase that long-term investors have been waiting for. Rather than holding on to a stock for months or years before you finally see a big payday, you can buy and hold for only a period of days and reap in the same monster returns as the long-time stock owners. As with many of our favorite patterns, when you learn to identify ascending and descending triangles, you can profit from upwards or downwards breakouts. That way, you’ll earn a healthy profit regardless of where the market is going. Set Your Target Price: For ascending and descending triangles, sell your stock at a target price of: Entry price plus the pattern’s height for an upward breakout. Entry price minus the pattern’s height for a downward breakout. To Profit from Symmetrical Triangles: Symmetrical triangles are very reliable. You can profit from upwards or downwards breakouts. You’ll learn more about how to earn from downtrends when we talk about maximizing profits. If you see a symmetrical triangle forming, watch it closely. The sooner you catch the breakout, the more money you stand to make. Watch For: Sideways movement, a period of rest, before the breakout. Price of the asset traveling between two converging trendlines. Breakout ¾ of the way to the apex. Set Your Target Price: As with all patterns, knowing when to get out is as important as knowing when to get in. Your target price is the safest time to sell, even if it looks like the trend may be continuing. For symmetrical triangles, sell your stock at a target price of: Entry price plus the pattern’s height for an upward breakout. Entry price minus the pattern’s height for a downward breakout. - See more at: http://stocks-basics.blogspot.com/2016/10/ascending-descending-triangles-chart.html#sthash.v0x01CDS.dpuf
Andrew's Pitchfork, otherwise known as median line studies utilizes the concepts of support, resistance, and retracements. As is visually depicted below, Andrew's Pitchfork consists of: • Handle • Resistance Trendline "tine" • Median Line • Support Trendline "tine" now lets see with an example how andrew’s pitchfork works. At very beginning we need to find a significant pivot or retracement (in the chart above, the lower left corner). Then find the next significant pivot or retracement. Thirdly find the next retracement. Now look at the graph. Red box areas showing the Low point, High point and low point. We also can see the support and resistance line and median line. The price of that share did not cross its resistance level and always got support at the support level. in the last are the price broke the support line and continued to fall. - See more at: http://stocks-basics.blogspot.com/2016/11/andrews-pitchfork.html#sthash.lpjt3eTm.dpuf
Aroon is an indicator system that determines whether a stock is trending or not and how strong the trend is. The Aroon indicators measure the number of periods since price recorded an x-day high or low. There are two separate indicators: Aroon-Up and Aroon-Down. A 25-day Aroon-Up measures the number of days since a 25-day high.A 25-day Aroon-Down measures the number of days since a 25-day low. In this sense, the Aroon indicators are quite different from typical momentum oscillators, which focus on price relative to time. Aroon is unique because it focuses on time relative to price. Chartists can use the Aroon indicators to spot emerging trends, identify consolidations, define correction periods and anticipate reversals. In graph we can see that Aroon indicator gave signal when Aroon-Up crossed the Aroon-down. this uptrend was sustain and went 50 points to 100 points. That time Aroon down also in downtrend. - See more at: http://stocks-basics.blogspot.com/2016/11/aroon.html#sthash.4VlGLuIx.dpuf
Fibonacci Fan consists of three Diagonal lines and these lines use Fibonacci Ratio to measure support & resistance level. Like Fibonacci Fan the way of drawing Fibonacci Fan is also same. In this case a Swing High and Swing Low will be needed to draw the Fibonacci Fan. After finding swing low and swing high point a line need to draw from low point to high point. Then three lines will be available with the Fibonacci Ratio like 38.2%, 50.0% and 61.8%. Look at the graph. The three lines worked as a support and resistance level. when price fallen at the first day it bounced back from its second support line. Then again went up and it didn’t break the last support. At last the price went up from the last support line. So the last support line was very strong. - See more at: http://stocks-basics.blogspot.com/2016/11/fibonacci-fan.html#sthash.EMKgt7zc.dpuf
In technical analysis Fibonacci Tools is very popular tools for measuring Support and Resistance level of a given stock. When market is in trend Fibonacci retracement can give better result for measuring possible support & resistance level. When market goes up an investor can stay up to his Fibonacci Resistance level and when market goes down an investor can stay up to his Fibonacci Support level. For calculation Fibonacci Retracement at first need to find out the Swing High and Swing Low point. Look at the chart there are two points are available. One is swing high and another is swing low. Now a Fibonacci retracement can be drawn from swing low to swing high. See there are some possible level of support and resistance like 38.2%, 50.0%, 61.8% and 100%. So if the stock price goes down then these level will work as a possible support and if the price goes up then these level will work as a possible resistance. - See more at: http://stocks-basics.blogspot.com/2016/11/fibonacci-retracement.html#sthash.fem2rM5i.dpuf
Like Fibonacci Retracement Fibonacci arc does same work. Fibonacci Arc also uses to determine the possible support & resistance level. When market is in trend Fibonacci Arc can give better result for measuring possible support & resistance level. When market goes up an investor can stay up to his Fibonacci Arc level and when market goes down an investor can stay up to his Fibonacci Arc level. Like Fibonacci Retracement, at first need to find out the Swing High and Swing Low point for calculating Fibonacci Arc. Look at the chart there are two points are available. One is swing high and another is swing low. Now a Fibonacci Arc can be drawn from swing low to swing high. See there are some possible level of support and resistance like 38.2%, 50.0%, 61.8% . So if the stock price goes down then these levels will work as a possible support and if the price goes up then these level will work as a possible resistance level. - See more at: http://stocks-basics.blogspot.com/2016/11/fibonacci-arc.html#sthash.uniEamdu.dpuf
Today we will discuss about relationship between Trend Line and Volume. We know trend line works as a support and resistance of a share. And if the price breaks the trend line it must be confirmed by the volume. Without large volume price cannot breaks the trend line. Look at the image. We have seen a downtrend rally was continuing. When price breaks the trend line for the first time it confirmed by the volume and it continued to increase. So here volume is very important incase of break out a trend line. sometime a trend line can show you wrong signals but you need to observe it very carefully. - See more at: http://stocks-basics.blogspot.com/2016/11/relationship-between-trend-line-and.html#sthash.IuMz5oAe.dpuf
Among traders Swing trade strategy is very popular. By using this strategy you can earn profit within very short period. Basically Swing Trading is to take position in a trade by based on Candlestick and support resistance line. Look at the graph. At first you have seen a reversal candlestick in support line so you can understand tomorrow it can pull back. Then next day you have seen a bullish candlestick so it pulled back. You can buy this share in that day and wait until the price goes at resistance line. When price went in resistance line then you can sell out and wait for next round. Few days later you have got the same pattern and you can also buy the share and sell at its resistance level. This is way you can get 3 times buy signals and 3 times sell signals from a particular stock. So it’s your responsibility to find out this pattern. - See more at: http://stocks-basics.blogspot.com/2016/11/swing-trade-strategy.html#sthash.0xo6u6Z9.dpuf
When two people go to war, the foolish man always rushes blindly into battle without a plan, much like a starving man at his favorite buffet spot. The wise man, on the other hand, will always get a situation report first to know the surrounding conditions that could affect how the battle plays out. Like in warfare, we must also get a situation report on the market we are trading. This means we need to know what kind of market environment we are actually in. Sometimes the system does in fact, suck. Other times, the system is potentially profitable, but it is being utilized in the wrong environment. Before spotting those opportunities, you have to be able to determine the market environment. The state of the market can be classified into three scenarios: 1.Trending up, 2. Trending down, 3. Ranging. A trending market is one in which price is generally moving in one direction. Sure, price may go against the trend every now and then, but looking at the longer time frames would show that those were just retracements. Trends are usually noted by "higher highs" and "higher lows" in an uptrend and "lower highs" and "lower lows" in a downtrend. Place a 7 period, a 20 period, and a 65 period Simple Moving Average on your chart. Then, wait until the three SMA's compress together and begin to fan out. If the 7 period SMA fans out on top of the 20 period SMA, and the 20 SMA on top of the 65 SMA, then price is trending up. On the other hand, if the 7 period SMA fans out below the 20 period SMA, and the 20 SMA is below the 65 SMA, then price is trending down. - See more at: http://stocks-basics.blogspot.com/2016/11/trend-spotting-1.html#sthash.yRBGPowT.dpuf
A ranging market is one in which price bounces in between a specific high price and low price. The high price acts as a major resistance level in which price can't seem to break through. Likewise, the low price acts as major support level in which price can't seem to break as well. Market movement could be classified as horizontal or sideways. The basic idea of a range-bound strategy is that a stock has a high and low price that it normally trades between. By buying near the low price, the trader is hoping to take profit around the high price. By selling near the high price, the trader is hoping to take profit around the low price. Popular tools to use are channels such as the one shown above and Bollinger bands. Using oscillators, like Stochastic or RSI, will help increase the odds of you finding a turning point in a range as they can identify potentially oversold and overbought conditions. - See more at: http://stocks-basics.blogspot.com/2016/11/trend-spotting-2.html#sthash.D4HNvCcJ.dpuf
Sometime many investors stuck in upper price level that means they purchase at resistance level. General people start panic selling when they stack a resistance level and ultimately price goes down. After few days number of sellers also decreases and market makers take this opportunity to make money. That time they purchase share in very low price and supply decrease gradually. When supply decreases the demand increase and ultimately it push price to increase. This price push breaks the resistance level and price goes up. Again Market makers takes this opportunity and sells their total holding to general investor and remain inactive for sometimes. This is like a cycle and continues forever. - See more at: http://stocks-basics.blogspot.com/2016/11/pushing-up-through-supply.html#sthash.qdYrk9Dv.dpuf
The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance. 1. Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. 2. Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. The perfect pattern would have equal highs on both sides of the cup, but this is not always the case. 3. Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. 4. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. 5. Duration: The cup can extend from 1 to 6 months 6. Volume: There should be a substantial increase in volume on the breakout above the handle's resistance. - See more at: http://stocks-basics.blogspot.com/2016/11/cup-handle.html#sthash.2fvGX1UI.dpuf
Dead Cat bounce is a financial Buzz word. In technical analysis we use this term to explain A temporary recovery from a prolonged decline or bear market, after which the market continues to fall. it happens because of short interest of investors. In a bearish market when demand and supply is not adjustable then for some specific period demand creates among the investors. it increases price of share for one or two days. Basically it is a Dead Cat Bounce. Recently, in our DSE chart we have seen this Dead Cat Bounce. Just look at the graph. After September month DSE index increased and volume also increased but did not sustain that level. It again happened in October and also in November month but did not sustain. This situation is called dead cat bounce. - See more at: http://stocks-basics.blogspot.com/2016/11/dead-cat-bounce.html#sthash.fDLL72JY.dpuf
This is one of the most popular and reliable chart patterns in technical analysis. head and shoulders is a reversal chart pattern than when formed, signals that the security is likely to move against the previous trend. The head and shoulders chart pattern illustrates a weakening in a trend by showing the deterioration in the successive movements of the highs and lows. The chart exactly showing what happened in our DSE. The chart formed two shoulders and one head and it has nick line. When it crossed its nick line then it went more down also price has decreased. - See more at: http://stocks-basics.blogspot.com/2016/11/head-and-shoulders.html#sthash.IfqCXCrF.dpuf
What is a good Tread? or how we can select a good trade? Many investor ask this types of question. we know some of the indicators we have that show the when market is risky and when the market is totally safe for investment. the picture shows the weekly chart and the trading range is 6758 to 5170. so there is 1580 point gaps are available so we can take it as our trading range. we can sell when it goes to its resistance and we can buy when the price goes to its support line. For this reason you have to take three decisions. 1. what will be the target price and stop price. 2. For next trade will you follow the trend or not. 3. Will you trade at a current market price or will wait for your desire market price. - See more at: http://stocks-basics.blogspot.com/2016/11/good-trade.html#sthash.0MD31VMW.dpuf
A gap in a chart is an empty space between a trading period and he following trading period. This occurs when there is a large difference in price between two sequential trading periods. If the trading range in one period is between 50 taka and 65 taka and the next trading period opens at 70 Taka there will be a large gap on the chart between these two periods. look at the chart first one downward gap. when the price of a particular share starts below than yesterdays price then there is a downward gap. in this situation 80% share’s price increase. Upward Gap is just reverse of Downward Trend and in case of Upward Tren 80% share’s price falls. - See more at: http://stocks-basics.blogspot.com/2016/11/gaps.html#sthash.fos7PaXz.dpuf
