STOCK'S KNOWS

Saturday, May 26, 2018

Identifying perfect entry and exit points using Fibonacci Retracement

Hey friends, welcome to Stock's Knows. Today we will understand about a charting tool which is commonly used by technicians to identify perfect entry and exit points in any trade. Finding perfect entry and exit point is as much important as finding a perfect stock to enter.

Because if you find perfect stock but you entered at the wrong point, it will cost you money.

Hence we need to find perfect entry and exit points to enter into any trade.

Trendlines and Channels

Gaurav Technical Analysis,

Hey friends, welcome to Stock’s knows. In today’s article, we will understand most basic but most useful concept in technical analysis: TrendLines and Channels.

Most Rewarding Chart patterns : Flags and Pennants

Gaurav Chart Patterns, Technical Analysis

Hey friends, welcome to Stock’s Knows. This is 4th part of chart patterns’ article. Today we will understand my favorite two chart patterns: Flags and Pennants. They are my favorite because they provide high reward as compared to risk, sometimes we can find 10 times reward as compared to risk. So, they are most rewarding chart patterns.

Flags and pennants both are continuation patterns and both form in the middle of the trends. They consist of poles and flags or triangles. Poles are previous directional moves in the direction of their trends. In the uptrend, after some upward moves, there was some consolidation period. Consolidation period looks like triangles or parallel channel.

Flag

Pennant

The full pattern looks like flag or triangle connected with poles. As they are continuation patterns, they are both bullish and bearish type.

1)Bullish flag:

Bullish flag pattern forms in the middle of the uptrend. Hence it is a bullish continuation pattern.

Bull flag as bullish continuation pattern

Bullish Flag

How to trade?

Trade when breakout happens. One can go long when breakout of bull flag pattern happens.

Where to put stop loss?

In a bull flag pattern, stop loss must be below flag level or below the previous low.

Bullish Flag

How to calculate Target?

For target calculation, one needs to measure the length of the pole from starting of uptrend to flag and need to project it above the flag.

2)Bear Flag:

Bearish flag pattern forms in the middle of the downtrend. Hence it is a bearish continuation pattern.

Bearish Flag

How to trade?

To trade bear flag pattern, one needs to go short when breakout of flag happens.

Where to put stop loss?

Perfect stop loss level is above flag or above the previous high.

Bearish Flag

How to calculate Target?

For target, one needs to measure the length of the pole from starting point of downward movement to the flag. And need to project it below the flag.

3)Bullish pennant:

Bullish pennant also forms in the middle of the uptrend. It is also bullish continuation pattern.

Bullish Pennant

How to trade?

One can go long when breakout of pennant pattern happens.

Where to put stop loss?

Perfect stop loss would be below the pennant or below the previous low.

Bullish Pennant

How to calculate Target?

For target, one needs to measure pole length from starting uptrend to the pennant and need to project it to above pennant from breakout level.

4)Bearish Pennant:

Bearish pennant is the bearish continuation pattern. It also forms in the middle of the downtrend.

Bearish Pennant

How to trade?

To trade bearish pennant pattern, one can go short when breakout of pennant happens.

Where to put stop loss?

Perfect stop loss would be above previous high or above pennant.

Bearish Pennant

How to calculate Target?

To calculate target, one needs to measure the pole length from starting point of downtrend to the pennant and need to project it to below the pennant.

Note: You can use the entire length of the pole in all above cases to project 2nd target but in that case, you need to use trailing stop loss or need to book partial profit around the 1st target.

Those were two most rewarding continuation patterns. Remember that they look like triangles but they are smaller than triangles. If you find helpful above information then please Share our article and Subscribe to the newsletter of our blog.

Chart Patterns: Part 3

Gaurav Chart Patterns, Technical Analysis

Hey friends, welcome to Stock’s Knows. This is the third part of chart patterns’ article. Today we will understand most reliable three continuation chart patterns: Symmetrical Triangles, Ascending Triangle, Descending Triangle.

1)Symmetrical Triangle:

Symmetrical Triangle chart pattern forms by two lines, declining upper line(or resistance) and rising lower line(or support). A symmetrical triangle is both bullish and bearish type. Bullish symmetrical triangle forms in an uptrend and bearish symmetrical triangle forms in a downtrend. In a bullish symmetrical triangle, breakout expectation would be upward, in bearish symmetrical triangle breakout expectation would be downward.

How to trade?

1)Trade at initial breakout:

I)In the bullish symmetrical triangle, one should go long at the time of upside breakout.

II)In a bearish symmetrical triangle, one should go short at the time of downside breakout.

2)Trade while retest:

In both cases, one can wait for the candle to close above or below breakout level and enter while retesting of breakout level.

Bullish Symmetrical Triangle

Bullish Symmetrical Triangle Pattern as Bullish continuation pattern

Image Source:Investing.com

Stop loss in bullish case:

1)Below the low of candle closed above breakout level.

2)Below the midpoint of the triangle.

3)Below the lower line of the triangle.

Stop loss in bearish case:

1)Above the high of candle closed below breakout level.

2)Above the midpoint of the triangle.

3)Above the upper line of the triangle.

Bearish Symmetrical Triangle

Image source:Investing.com

How to calculate Target:

For target, one needs to calculate price difference between widest points of the triangle and project it above or below from breakout level as per bullish or bearish triangle breakout.

2)Ascending Triangle:

The ascending triangle is a bullish continuation pattern. It is a combination of two lines, almost flat resistance or upper line and rising support or lower line. This pattern is the indication of buyers are more aggressive than sellers. This pattern generally forms in an uptrend.

Sometimes it acts as a bullish reversal pattern if forms in the downtrend.

How to trade?

1)Trade at initial breakout:

This pattern is strong bullish continuation pattern; hence one should go long while initial breakout. Sometimes this method proved risky.

2)Trade while retest:

For comfort, one can wait to successful breakout, minimum one candle close above the breakout level. Trade when retest of breakout level happens. This method gives comfort and confidence.

Ascending Triangle Chart Pattern as bullish continuation pattern

Image source:Investing.com

Stop loss options:

1)Below the low of candle closed above breakout level.

2)Below the midpoint of the triangle.

3)Below the lower line of the triangle.

How to calculate Target:

For target, one needs to calculate price difference between widest points of the triangle and project it towards breakout direction from breakout level. One can also use next resistance level as the target.

3)Descending Triangle:

This pattern is the indication of sellers are more aggressive than buyers. Hence it is a bearish continuation pattern. Sometimes it acts as a bearish reversal pattern if forms after an uptrend. It forms by two lines, flat lower line or support and declining upper line or resistance.

How to trade?

1)Trade at initial breakout:

One should go short at the time of initial breakout.

2)Trade while retest:

For comfort, one can wait for the successful breakout below breakout level and trade while retesting of a breakout.

Descending Triangle Chart Pattern as bearish continuation pattern

Image source:Investing.com

Stop loss options:

1)Above the high of candle closed below breakout level.

2)Above the midpoint of a triangle.

3)Above the upper line of the triangle.

How to calculate target?

For target, one needs to calculate price difference between widest points of the triangle and project it below the breakout level. One can also use next support level as the target.

In all three triangles, stop loss and target calculation is almost same but the direction is different.

These were three most comfortable continuation patterns. In next article, we will understand flag and pennant patterns. If you find helpful above information then please Share our article and Subscribe to the newsletter of our blog.

Chart Patterns : Part 2

Gaurav Chart Patterns, Technical Analysis

Hey friends, welcome to Stock’s Knows. This is the 2nd part of Chart patterns' article, in this article we will understand another four chart patterns: double top – double bottom, triple top – triple bottom.

1)Double Top:

The double Top pattern forms by two prominent highs. It is a bearish reversal pattern. The graphical shape of the double top looks like “M”. When the price isn’t able to move above the first high, this is the first weakness point. When price moves below the low made between two highs, the double top pattern is completed.

How to trade?

To trade double top chart pattern for profit, one should go short when price moves below the low, made between two highs.

Stop loss:

Ideally, stop loss for this trade would be above some point of the low between two highs.

How to Calculate Target?

For target calculation, one needs to calculate price difference between highs and low formed between those highs and project it downside from breakout level.

Image source: Investing.com

2)Double bottom:

The double bottom chart pattern forms by two prominent lows. It is a bullish reversal pattern. The graphical shape of the double bottom is like “W”. When price doesn’t go below first low, this was the first indication of strength. When it moves above the high formed between two low levels, the double bottom is completed.

How to trade?

To trade double bottom chart pattern for profit, one should go long when price moves above the high formed between those two low levels.

Stop loss:

Ideal stop loss for this trade would be below the high, made between those two lows.

How to calculate Target?

For target calculation, one needs to calculate price difference between Lows and High formed between those low levels and project it to upside from breakout level.

Image source: Investing.com

3)Triple Top:

The triple top chart pattern forms by three prominent highs (or tops). It is the strong bearish reversal pattern.
The triple top pattern is same as head and shoulder pattern. The only difference between them is that in triple top all the highs are at the same levels, whereas in head and shoulder pattern first and third highs at nearly same levels but the second high is at the higher level.
When we joint two lows formed between first and third highs, we get a line which is known as the neckline of this pattern. When price moves below neckline triple top chart pattern is completed.

How to trade?

To trade triple top chart pattern, one should go short, once price moves below the neckline (breakout level).

Stop loss:

Ideal stop loss for this trade would be above the neckline.

How to calculate target?

To calculate target, one needs to calculate price difference between neckline and highs. And should project it below from neckline.

Image source: Investing.com

4)Triple bottom:

The triple bottom chart pattern forms by three prominent lows. It is a strong bullish reversal pattern.
Triple bottom chart pattern looks like an inverted head and shoulder pattern, the only difference between them is, in the inverted head and shoulder pattern 2^nd low is lower than both first and third low, whereas in the triple bottom all three lows forms generally at the same level.
When we joint two highs between first and third highs, we get a line which is known as the neckline of this pattern. When price moves above the neckline, triple bottom chart pattern is completed.

How to trade?

To trade triple bottom, one should go long, once price moves above neckline (breakout level).

Stop loss:

Ideal stop loss for this trade would be below the neckline.

How to calculate Target?

To calculate target, one needs to measure price difference between neckline and lows. And should project it above from neckline.

Image source: Investing.com

These were another four chart patterns which will be very helpful if one understand and do practice to find those patterns to predict price direction. If you find helpful above information then please Share our article and Subscribe to the newsletter of our blog.

Saturday, May 26, 2018

Identifying perfect entry and exit points using Fibonacci Retracement

Friday, May 11, 2018

Trendlines and Channels

Thursday, May 10, 2018

Most Rewarding Chart patterns : Flags and Pennants

Tuesday, May 8, 2018

Chart Patterns: Part 3

Sunday, May 6, 2018

Chart Patterns : Part 2

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