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Technical Analysis - Part 2

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Figures of price in Technical Analysis The figures of price or formations are images that appear in the graphs with measuring implications. Mainly could be divided into two groups: Figures return and of continuation.

Return figures They indicate that it is taking place a return or a major change in trend

Shoulder Head Shoulder Figure shoulder-head-shoulder is one of the safest and most common signs of change in trend, either up, if it is a shoulder-head-shoulder inverted, as downward. They usually produce highs and lows and their development is usually very reliable, as long as the break occurs in the "neckline line" and it is important to monitor the volume at which this break occurs to improve reliability. This figure allows measurement minimum price targets that can be achieved in the next move. The measurement is obtained by drawing a vertical line from the peak of the head to the "neck line". This distance is obtained, if projected from the point of rupture of the neck line, leading to a price level that is probably the minimum that will be reached in the next move.Shoulder Head Shoulder Shoulder Head Shoulder inverted 

Double Top and Double Bottom This formations are rare, though no longer important, since their appearance (not as frequent as the previous figure), may indicate the end of an important main trend. To validate training, it must occur on a fairly long interval of time, approximately one to two or more months between each maximum These figures also provide an objective measurement of prices in the following market reaction. The measurement is done by taking the greatest distance between the maximum and the minimum of the formation. This measurement is drawn from the break in the direction that follows the price.

Double Top  Double Bottom

Turns in a day Normally they mark the beginning of a correction against the trend and not a change of the same. These figures should be used in combination with other indicators, since its reliability is less, although the larger the volume and higher path has the candle, more significant will be the given signal. A likely indication that can produce this formation, although not always happens this way, is the appearance of an island. An islet, or turn in a day, is a pattern of price that occurs in a session in which the quote reaches a maximum at some point in the day but just closing below the closing quote of the previous session. In this island normally accompanies strong negotiation. The higher the negotiation and bigger the price the route, more important is the signal that offers

Channels A channel is a line parallel to the trend that unites, in the case of an upward trend, the successive maximum prices and in the case of a downtrend the successive minima. The channels will also serve to calculate prices measurement objectives, So that the rule that is in use is that the break of a channel for any of his sides it will lead to the price to an equal distance to the width of the channel in the direction of the break, and while it remains in the channel, the band formed by the same one will be his range.  

Channels bullish

Wedge Cots are figures that indicate changes of trend, resulting in more frequent in secondary trends, so it is sometimes considered them figures of continuation of the primary trend. The figure is formed by two lines of converging trend that are joined at the boundary, such as a triangle. Both lines have a considerable inclination and the prices are fluctuating between the two lines. The wedges are inclined against the trend that follows. A wedge tilted upward is a bearish formation. A downward slant wedge is a bullish formation. The descending wedges are signs of change of trend bearish to bullish and rising wedges are from bullish to bearish. It is important to note, a difference that is important, It is that in the ascending wedges the prices fall down with great rapidity, whereas in descending wedges, once the signal has occurred with the break up, the prices tend to move laterally for some time.  

Falling wedge  

Rising wedge 

 

 2. Figures of continuation The figures of continuation show price movements almost sideways, which predict maintenance of the trend that preceded them. Their training usually takes place within a period of time shorter than the figures of trend reversal.

Triangles These figures are formed where occur peaks or ceilings descending and floors or ridges ascending A triangle is considered symmetric when both lines of supply and demand,  lean clearly towards down and upward respectively.

The symmetrical triangle

 

The apex of the triangle, partially limit the formation time that is to be resolved figure. A symmetrical triangle, in principle, does not indicate whether the trend will continue or change, but most of the time indicates a continuation of the previous trend. Meaning of Triangle: what it reveals the figure, is that there are doubts or market uncertainties regarding the future evolution of the price, so it is difficult to determine if the trend is going to keep or change. Also exist rectangles triangles(one corner is 90%), both upward and downward, which generally tend to be trend continuation. The price objective, once produced the rupture usually coincides with the height of one of the legs (the two sides of the triangle that form the right angle).

The ascending triangle

The descending triangle

 

Flags and Pennants Both figures are the first to clearly indicate a continuation of the trend. The flags are small rectangles that form the prices, lightly inclined in opposition to the trend that they precedes.

Flag pattern 

The pennants are similar but slightly converging lines, forming a kind of small wedges, also inclined against the preceding trend.

Pennant pattern 

The flags and pennants represent slight pauses in an active market.  

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Erick Gálvez
Author: Erick GálvezWebsite: http://www.asdforex..comEmail: This email address is being protected from spambots. You need JavaScript enabled to view it.
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