Investors who train their eyes to recognize price patterns can have an enormous advantage over those who refuse to learn or are just plain ignorant.
The key to practical application is to focus on when these patterns work.
In general, you should look out for buy patterns during an uptrend market. You would not want to follow the same pattern in a declining market.
The diagram below is the cup with handle pattern in theory.
A, B, C shapes the cup while C, D make up the handle.
The right time to buy a stock is when price advance from D and crosses the dotted line.
The cup with handle was spotted during the rising Singapore market in 1999.
Another pattern shown below is the double botttom.
It is shaped like the alphabet W.
X1 is the 1st bottom, X2 is the 2nd bottom and Z is the peak of the W shaped pattern.
The right time to buy a stock is when the price advance from X2 through Z.
A double bottom preceded an advance in the STI in 1999.
Pattern analysis, like any other forms of technical analysis, is only a part in solving the stock market puzzle.
Still, you should incorporate some form of technical analysis into your stock investment strategy
You can have an edge over investors who don’t.
For more patterns, click here to visit the website belonging to the author of Encyclopedia of Chart Patterns, Thomas N. Bulkowski.Return from Price Patterns to Stock Timing