Bottoms
Stock Chart Patterns
Double or triple bottoms are well-known stock chart patterns. They’re often called reversal patterns. They signalize that actual trend is coming to the end. It is not sure that stock will immediately start new trend in opposite direction, but this stock chart pattern is already warning sign. You can find info about them in any basic book about technical analysis. But even so I think this is a simple but powerful chart pattern. To identify bottoms, you need to see these two signals: - price made two or more almost similar bases
- price
retraced
back
more then 80%
after each low
The
retracement level technique
is very good for analysis of pullbacks. It helps to find what other traders do. Are they buying already? Or do they only wait for pullback and expect another strong move down in current
downtrend
move ?40% or 50% retracement level is very common in good trend moves. But when stock come back more in their pullback, then it is good to think more about possible change in the trend. And such change often offer very nice trading opportunity !
Trading rules
for these stock chart patterns
Recommended trading rules say to wait for a breakout of a horizontal resistance level of this stock chart pattern. Then, trader enters a long trade, and expect a new rising trend to develop.The
stop-loss level
should be below the resistance level. I do not prefer to use large stops. I know that best trades are good immediately from the beginning so it is not necessary to provide a lot of space for pullback to such trade. Initial stop loss level should be placed right under resistance level and moved under breaking candlestick immediately after break is successfully finished by the trading day.
My stock market trading tip
You can wait to be sure that a breakout from this type of stock chart pattern was successful. Wait for a pullback to the former resistance level to act now as a new support level and buy it immediately when it bounces from this
horizontal support level
There were possible to use breakout and also pullback
entry
strategies on the charts of BIIB above.
Return from Bottoms to stock chart patterns
|
