Understanding Support and Resistance Patterns
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ScribdTranslationsUnderstanding Support and Resistance Patterns
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ScribdTranslationsSupport and Resistance:
High Triangle
Low Triangle:
Symmetrical triangle:
Rectangle:
Flag:
Flag:
High Line (LTA):
By Eder Matos
Low Line (LTB):
Support and Resistance:
Support and resistance are two basic concepts of technical analysis. Knowing them and understanding
Identifying them is of utmost importance for those who intend to operate in the stock market.
two graphs.
As we have seen in other articles, the market is made up of buyers and sellers. Some
sometimes buyers win the battle, causing the market to start a trend of
high. Other times the sellers come out victorious and make the market start a
downward trend.
The points where these "battles" happen are very important, as they define the pause or the
reversal of the previous trend, whether it is upward, downward, or even sideways.
at these points we can identify the supports and resistances.
The correct identification of these points generates both inputs and outputs of operations.
Obviously, the input or output graphic setups (operational strategies) do not
they depend only on support and resistance, but these concepts are part of the formation
basic for any chart analyst.
High Triangle:
The upward triangle formation is a typically bullish formation that is
forms in an upward trend.
In terms of pattern, the ascending triangle formation is made up of the
following elements:
Upper Horizontal Line: in this standard chart there should be at least two
maximum points that when connected form a horizontal line. These points
they should have an approximate quotation and some distance between them. In the period of
the time that separates them should contain a point of minimum
Uptrend line: there must be at least two points of lows
successively higher quotes over time, which when combined form a line of
upward trend
Duration of training: the time period covered by this standard graph may extend
from a few weeks to several months
Volume: typically, as time progresses, the volume will
decreasing down to the point where the vanishing point appears. In that situation, if the volume
to increase means that the vanishing point is confirmed.
Low Triangle:
It is a graphic pattern or figure of continuity that represents a
moment of price consolidation. But how does the formation of
standard? Generally, the descending triangle is formed by at least
two bottoms in the same price range and two descending peaks.
In the back region, a horizontal line is drawn that serves
as support. A diagonal line is drawn by connecting the tops
descendant that functions as a resistance of the pattern. After tracing the
lines make it possible to better verify the formation of the down triangle.
Symmetrical triangle:
The symmetric triangle is a continuation pattern that
developed in the markets and seems to have no direction
defined. The pattern contains at least two least-supers.
two lower maxima that seem to arise together. When the
lines that connect these points are extended, they converge,
giving rise to a symmetrical triangle.
The symmetric triangle has implications for measurement and regulation.
When the pattern is complete, the price and volume decrease.
before reacting strongly to the exit of the limits of
triangle. When the break occurs, prices tend to move
a distance equal to the base of the triangle or even more. In a
time perspective, the gap of a triangle occurs between the
half and two thirds of the distance from the base to the vertex, this
is the top of the triangle.
Rectangle:
The rectangle characterizes the state of the market when the price varies.
between two lines, one of support and the other of resistance, parallel
between each other. The highs and the lows form, in this case, a sequence
horizontal. Unlike the flag, the rectangles appear as
larger areas of consolidation, after a strong trend, and the
Prices move out of this pattern in the same direction they entered.
The market continues in the same direction it had before the formation of
rectangle, usually when it has gathered enough strength and is ready
to continue the movement.
Flag:
This is the most reliable pattern regarding the continuation of the trend. It forms a short
consolidation period after strong fluctuations. Thus, the flag is like an interval that
it comes after turbulent movements, when there is a need in the market to
a pause due to the fact that the 'bears' or 'bulls' are taking some of their profits. Once
that they do not do it simultaneously, a short trend appears in the opposite direction. The flag
there is a tendency contrary to the trend that dominated prices before its formation. In
meanwhile, the break of the flag line downwards or upwards indicates the continuation of the
downward or upward trend, respectively. This is a signal to the 'bulls' or 'bears'
We will start reopening long or short positions again. However, a sudden breakout
In the opposite direction to what was expected, it signals a trend reversal.
As we can see in the figure below, the breaking of the upper line of the flag led to
an upward trend.
Flag:
The pennant also represents a short phase of consolidation.
of the trend. This pattern occurs in very marked trends,
after a strong market movement. The flag is a trend of
short duration, directed in the opposite direction but, however, in it
No correction is verified. The banner differs in the lines.
converging, which on the flag are parallel. This pattern looks like
with a triangle, but it forms much faster than it.
High Line (LTA):
A LTA corresponds to the diagonal line that connects ascending bottoms at a minimum and
its main objective is to monitor the rising price trends of
determined asset. Among the characteristics that can help in the identification of
a LTA are:
large upward slope;
it acts as support, the closer the price is to the LTA,
there will be greater buying pressure;
the more funds touch the LTA, the more significant the upward trend is;
the break of the LTA downwards signals the reversal of the current trend.
Low Line (LTB):
LTB corresponds to a diagonal line that serves to connect at least two
places in a descending direction, which were drawn from the highest level of
trend. The main objective is to monitor the downward trends of
determined asset. Among the characteristics that can aid in the identification of
a LTB is:
large decreasing slope;
it acts as resistance, with the closer the price is to
The greater the LTB, the greater the selling pressure;
the more tops touch the LTB, the more significant the downward trend becomes;
the break of the LTB upwards signals the reversal of the current trend.
THE TWO BASIC PREMISES OF TECHNICAL ANALYSIS ARE:
PRICES FOLLOW TRENDS;
HISTORY REPEATS ITSELF.
It's not just because a formation is created after
a significant upward or downward movement,
it is not, by itself, synonymous with inversion. Many
shapes such as rectangles can be
classified as inversion formations or
continuing. I depend a lot on the action
preview of the price, the volume, and others
indicators as training progresses.
So before any operation, make a
macro analysis of the entire scenario, as it is a
sets of patterns that show what the
probabilities of an operation being
By Eder Matos
winner....
I hope it helps everyone and good traders.