BINARY OPTIONS COURSE -

IOPTION
[Link]
CLASS 1–INITIAL CONCEPTS and TYPES OF GRAPHS
BASIC TECHNICAL ANALYSIS COURSE FOR TRADERS!
LESSON 01 - INITIAL CONCEPTS and TYPES OF CHARTS
The goal of this basic course is to introduce those starting in the financial market to the main concepts of
TECHNICAL ANALYSIS.
We will initially study Candlesticks, focusing on the practical aspects and setting aside the details.
historical and other aspects that may and should be researched and studied by those interested in other sources.
Although basic, we can affirm that this course will fill a gap in knowledge, and by itself will be
sufficient for the learner to begin their entry into the markets of BINARY OPTIONS, FOREX, and other markets
that use TECHNICAL ANALYSIS as a tool.
We begin with a brief concept of what TECHNICAL ANALYSIS is in itself.
What is technical analysis?
Technical analysis, in a simple way, is an approach that allows its practitioner to evaluate
What is the best timing to start and end a buying or selling operation?
a financial asset or when it should stay out of the market. To this end, it uses charts and theories formulated about its
dynamic and, more recently, complementary mathematical-statistical studies that will be known throughout this and
of other courses that will be taught here.
The first theories and operational methods emerged in the early 20th century. In our research, we found that, in
In 1901, during the merger of U.S. Steel, one of its directors, James R. Keene, used the point chart technique.
Figure intensely. Subsequently, some "scalpers" (floor operators) began to use it in their
day-trade operations (intraday) and the practice of the market has turned it into a commonly used theory, not
knowing for sure who your creator was.
At the same time, Charles H. Dow, owner of an information service focused on the
financial market - Dow-Jones Financial News - and to whom the invention of indices is credited
stock market, in articles written for the Wall Street Journal defined the basic concepts of
would become a theory. After his death in 1902, his successor in the editorship of the newspaper, William P.
Hamilton continued writing new editorials for the next 27 years and shaping what
today is internationally known as 'Dow Theory', in our opinion, the essence of analysis
technique and where we will start. But first, we need to know some basic concepts.
for better understanding of its rules and concepts.
TECHNICAL ANALYSIS uses various figures to represent prices. It is with these figures that one
they form the graphs.
In this article, we will clarify some concepts surrounding graphs and their applications.
A quotation chart is a sequence of points defined in a given sampling window using for this a
time database (timeframe). Each chart has two axes. On the X axis, there is the time scale and on the Y axis we have
the values of the quotations.

The timeframe used can vary from chart to chart depending on the analyst's strategy. It can
an intraday, daily, weekly, monthly, quarterly, or annual time base can be used. The smaller the base is
time, less compression will have the visualization of the graph.
A daily time base uses one point for each trading session day to draw the graph, while
A weekly time base uses one point for every 7 days. For example, if we view 100 on a daily chart.
information points, in a weekly chart with the same number of points we will visualize 5 months (one year
will correspond, roughly, to 252 points) of quotes. Generally, analysts use intraday charts.
(visualization of the variation of quotes throughout the stock session) or daily charts in order to analyze the
short-term evolution of quotations. If you want to analyze the medium/long-term trends of a company.
they should use monthly or annual graphs.
Basically, there are 3 different types of charts used in TECHNICAL ANALYSIS: line charts, bar charts, and
candlesticks
[Link] graphs
The line graph is the simplest graph. It is drawn by connecting each consecutive point with a line.
In the y-x graph, the coordinate on the Y axis will be the closing price and the coordinate on the X axis will be the trading date.
in which the quotation occurred. The great advantage of these graphs is that their analysis is quite intuitive.

[Link] chart
The bar chart is already a more complex chart. To draw it, 4 data points per date are needed: the quote of
closing, the maximum and minimum value of the day, as well as the opening quote. The session's maximum and minimum
sessions define the extremes of the line defined by each day. The small horizontal line to the right defines the quotation
The one pointing to the right defines the closing value, while the one pointing to the left defines the opening value.

The great advantage of this type of chart over the line chart is that it provides more information, even if it is from
denser reading.
[Link] Chart
This chart comes from Japan and has become very popular in the last decade. In a candlestick chart, there are
the closing and opening values are necessary, as well as the maximum and minimum of the session. The great advantage
these graphs allow a quick reading of the relationship between the final and opening price. If the candle is white,
it means that the closing value was higher than the opening value. If the candle is black, it is because the quote of
the closing ended below the opening value.

Candlesticks originated in Japan in the 17th century with the rice market.
From then until now, this system of representation has undergone changes until
arrive in present days, where it is widely used for graphical analysis.
Like any technical analysis, it should be used together with others.
tools.
To create the candlestick, the opening and closing price is used,
maximum and minimum of each period. The body of the candlestick is represented by
a bar whose height is given by the difference between the closing price and
opening, while the line above and below correspond to the maximum price and
minimum respectively.
When the closing price is higher than the opening price of the period, the
The candlestick is represented here by the blue color for easier visualization.
And when the closing price is lower than the opening price of the period,
the red color is used.

Long body vs short: A long-bodied candlestick shows a more intense battle between buyers and sellers,
while the shorts demonstrate price consolidation. After a rise, a long red candle can
represent the establishment of a point of resistance. On the other hand, after a price drop, a long
A blue candle can represent the establishment of a support point.
COMMON CANDLESTICK PATTERNS: Marubozu: When the opening price coincides with the low, and
the closing price with the maximum shows a blue Marubozu, indicating that buyers dominated the
auction most of the time. When the opening price coincides with the maximum, and the closing price with the minimum.

We have a red Marubozu, indicating that the sellers dominated the trading session.
Hammer - Minimum long and maximum short line: In this case, sellers dominated for a period.
creating a long line of minimum, but later the buyers prevailed. It can be blue or red,

However, when it was red, buyers were not so predominant.

Inverted Hammer – Long maximum line and short minimum: Buyers dominated for a period of time.
auction, forcing a rise, however later there was a predominance of sellers that caused a closing
smaller than the opening. It can be blue or red, but when it is blue the sellers were not as strong.

"Spinning Tops" - Line of equal highs and lows and a small body: In this case, there was indecision between
buyers and sellers, since the opening and closing are very close and the lines of maximum and minimum

are equivalent.
Doji: At the limit of the previous pattern, when the opening and closing prices are practically equal, a Doji is formed.
which represents total indecision between buyers and sellers. After a rise or fall, the appearance of a

Doji should be seen as a warning for some likely change in trend.

More candlestick patterns: In the Harami, the body of the last candlestick is within the body of the previous day.
"engulfing" (engolfo) the body of the previous day is within the last candlestick. In "Star" there is no price in
same range as the previous day, occurring a 'gap'.
Candlesticks are primarily used to predict a reversal of an uptrend or downtrend. In this way
Standardized figures are formed, many with exotic names, which are divided into bullish or bearish patterns.
Bullish patterns indicate that the downtrend is nearing its end, and bearish patterns indicate the end of the uptrend.
There are many of these patterns, the most well-known are shown below. In most cases, it is recommended to wait for the
next auction, after the pattern, to confirm the reversal. The patterns 'Hammer' or 'Shooting Star' are independent of

color of the candlestick.

Due to the visual ease of detecting market sentiment, candlesticks are the preferred choice for
professionals, being used in conjunction with other tools of technical analysis.

Lesson 2 – Dow Theory

Dow Theory is one of the main foundations of technical analysis. The theory consists of several basic principles that
we will study next.
Principle 1: Indices Discount Everything
The indices represent the joint action of numerous investors, from the most informed (who have access to
the best information and forecasts) even for the very inexperienced. The daily variations in the prices of an index,
Therefore, they already include (deducted) in their value the events that will happen which are unknown to them.
majority of investors.
Thus, all factors that affect the supply/demand relationship are reflected in the market price. However,
there are events that are unpredictable and that people cannot foresee, such as natural disasters,
catastrophes like the attacks on the American towers, etc. These are the so-called 'divine acts', when they happen.
they can generate strong initial fluctuations, but end up being absorbed by the market.
Summary of the Principle:
All factors that affect supply and demand are reflected in the index.
The Index already has in its value (already discounted) future events that the vast majority do not know.
Completely unexpected events are quickly assessed and their possible effects absorbed.
Principle 2: The Three Market Trends
The second principle of Dow states that the market has three trends of movement: primary, secondary and
tertiary.
Primary trend is the main trend of a market. It is a long movement that can be upward or downward.
falls and leads to a significant appreciation or depreciation of assets. There are no exact mathematical rules for
define the duration of trends, however, primary trends last approximately 1 to 2
Years. In the figure below, the vertical lines are separating three primary trends in the index.
Bovespa.

A primary trend does not move in a straight line. When

we observe the market (as the graph shows) we realize that the movement happens like a zigzag.
In a bull market, after a upward impulse that forms a new peak (higher than the previous one), we have a
correction that forms a new bottom (also higher than the previous bottom). In a downtrend the opposite.
It happens, after a drop that creates a lower low, a reaction occurs that creates a lower high.
The set of these impulses and corrections within a primary trend are called secondary trends.
A secondary trend lasts from 3 weeks to a few months and can correct up to two-thirds of the primary trend.
that she is a part of.
Tertiary trends are part of secondary trends. They are smaller movements averaging up to 3 weeks.
they behave towards secondary trends in the same way that secondaries behave towards primaries.
When we are analyzing the market, it is interesting to classify the trends of the current movement, so we can
better evaluate the actions to be taken within our operational strategy.
Principle 3: The Three Phases of Movements
Dow made a series of observations about price movements, both upward and downward, characterizing
notable psychological aspects of each phase:
Phases of a Bull Market
Phase 1: At the beginning of the rally, the market begins to be propelled by more qualified investors, who
They soon realize that new winds are blowing. Meanwhile, most still believe that the worst is yet to come.
is about to come, which allows elite investors to buy stocks very cheaply. The news
presented by the media reflect the negative expectations of the majority.
Phase 2: The second part is a more pronounced acceleration of the movement. Buyer pressure increases.
quite
Phase 3: The third phase is marked by significant highs. Market participants, in general, are
more and more confident in their profits and the better-prepared investors begin to sell their
positions. The large mass of investors is in a state of euphoria that is fed daily in the
news. The possibility for phase 1 of the bear market is open.
Bear Market Phases
Phase 1: In this phase, elite professionals and investors sell their assets, initiating the retraction.
Phase 2: It is a stage marked by great nervousness, investors realize the mistake and try to
undo your positions.
Phase 3: With significant losses and highly devalued assets, selling pressure dissipates, opportunities arise.
For a new high, signs are starting to appear.
Principle 4: The Principle of Confirmation
The confirmation principle states that for a trend reversal or breakout of a level
support/resistance (supports and resistances will be better explained in the following chapters) to be valid, the fact must
occurring in two distinct composition indexes. Thus, one index confirms the other, demonstrating that it is not about
of a temporary oscillation of the movement.

To illustrate the principle of confirmation, suppose two indices (A

of different compositions, but that behave in a similar way. The index A, during a rise, wins
the selling pressure zone (the resistance line) and seems to continue strongly in its trend. The index B,
Meanwhile, upon arriving for the first time at the resistance line, it fails to break through in the same way as A.
An investor who analyzes the market only from the perspective of the index can conclude that there are good
purchase opportunity right after the breakout. However, what happens is a pullback, as the market does not
was as strong as demonstrated by the break failure on the part of B.
This is the essence of the principle of confirmation. Two indices are used for one to pronounce a 'second
opinion" about the other, in order to validate what is happening or indicate a trap. In the Brazilian case, these
Two indices could be, for example, the Bovespa index and the IBRX.
Principle 5: Volume Must Confirm the Trend
This principle is quite simple; in Dow theory, volume is related to trends in the following.
way
Uptrend: In a main uptrend, it is expected that the volume will increase with the appreciation.
assets and reduce in devaluation reactions.
Downward trend: In a main downward trend, it is expected that volume will increase with the depreciation.
increase the assets and decrease in the appreciation reactions.
Principle 6: The Trend Continues Until a Definitive Signal of Reversal Emerges
Although it seems obvious, this principle is important. The market will not fall just because it has reached a 'high' level.
"too much" or rise because "has already fallen too much". One of the simplest techniques used is the identification of failures when
to form a higher top (in an upward trend) or a lower bottom (in a downward trend). The
The investor must have a methodology for identifying entry and exit points; there are a series of
technical analysis tools that help with these decisions. In this and other tutorials and articles you will learn about
classic patterns, candles, indicators, and many other tools of the graphic school.
Topics and Backgrounds
Topos and Funds

In simple terms, peaks and troughs are extreme points in

Graph of an asset. Based on this principle, where are the extreme points in the figure to the side?
Correct, they are basically located in the peaks and valleys of the graph. To make it clearer, let's address these.
important principles of technical analysis separately.
What is a peak?
It is the end or the highest point of an upward movement, which precedes a downward movement. Place where
the price stopped rising and started to fall. Generally, the formation of the top is marked by a reversal point
low, a subject that will be addressed at another point in the learning.

It is worth noting that the top is the most important resistance area on the chart. Why? Because it is an easy point.
remembrance and identification by various investors, marked by the reversal of a bullish movement to bearish.
Example–Top
Let's go to a practical example. In the daily chart of CYRE3, shown below, where are the peaks? To make it easier, which ones
Are these the points where the price stops rising and starts to fall?

That's right, the circles highlighted in red are the peaks, reversal points of an upward movement to a
downward movement.
What is a fund?
It is the end or the lowest point of a downward movement, which precedes an upward movement. Location
where the price stopped falling and started to rise. Usually, the formation of the bottom is marked by a turning point.
of high, a subject that will also be addressed in another learning topic.
It is worth noting that the bottom is the most important support area on the chart. Why? Because it is an easy point of
remembrance and identification by various investors, marked by the reversal of a downward movement to upward.
Example–Fund
Let's go to a practical example. In the daily chart of CYRE3, shown below, where are the bottoms? First of all
identify the extreme points. Now what are the points where the price stops falling and starts to rise?

That's right, the circles highlighted in blue are the bottoms, reversal points of a downward movement to a
upward movement.
Example - Tops and Bottoms
Let's now go to a new example. In the daily chart of BVMF3, where are the peaks and troughs? In the attempt to
Simplify, first look to mark the extreme points.
The peaks, points where the price stops rising after a bullish movement and starts to fall, are the tops. The troughs, points
where the price stops falling after a downward movement and starts to rise, are the bottoms. Look at the graph below
the tops and bottoms properly highlighted respectively in red and blue.

The correct identification of tops and bottoms is of fundamental importance in technical analysis, as it will facilitate the
understanding of other essential principles, such as upward and downward trends. Subject that will be
addressed in another topic of our learning.

Upward Trend, Downward Trend and Channels

Introduction
Trend lines are drawn from identifying the trend in which a stock is located.
There are three types of trend for the stocks:
Uptrend;
2. Downtrend;
3. Lateral Trend;
For each trend, it is possible to draw trend lines that the stocks respect while the
trend does not change. The graphic designer or technical analyst operates in favor of the trend (THE TREND IS YOURS
FRIEND!), especially within the channels, buying (CALL) at the lower edges and selling (PUT)
at the top edges, to achieve the best results.
Upward Trend
The upward trend in a stock is defined when, in its chart, ascending lows can be detected.
This means that the paper in question is forming funds at increasingly higher levels, which gives
continuation of the upward trend.

Downtrend
It is possible to determine a downtrend in a stock when its chart shows lower highs.
In this way, increasingly lower peaks are noted.

Lateral Trend
A stock is in a lateral trend when it continues to form peaks and troughs at the same levels.
previous ones, respectively. This formation is also known as a rectangle.

Uptrend Line
The rising trend line (or lta) is drawn to touch the candlesticks of a stock from below.
in the chart. Thus, at least two candlesticks are needed to draw the uptrend line. The more
The more candlesticks are touched when drawing the uptrend line, the stronger it will be.

The most conservative way is to draw the line touching only the minimum points of the candlesticks. This
because, when identifying an upward trend for a stock, and drawing an upward trend line on the chart, a good
the strategy is to buy as close as possible to the trend line, increasing the risk-reward ratio. In some
In cases, the dispute over buying/selling the stock may prevent prices from reaching the highs.
traced. In others, it can cause the lta to be lightly crossed.
Another way, which works very well in many situations, is to draw the line tangent not to the points.
minimum of two periods taken, but what is lower between the closing and the opening of the candlestick.
Or still, certain lines are 'better adapted' to the movement of the paper when one seeks a
combination of the two ways, so that the lta is played as many times as possible by
price candlesticks, obviously not crossed by these.
Downtrend Line
Similarly to the lta, the downward trend line (ltb) is drawn by tangentially touching the peaks of the candlesticks.
of the chart. Likewise, the more candlesticks are touched by the ltb, the greater strength it will have over the
paper in question.
The most defensive way to draw the ltb is to draw the line touching the highs of the candlesticks.
Just like in lta, in many cases, the ltb is better drawn if instead of using the highs of
Each candlestick, the greater value between the opening and closing of each candlestick is used.

Trend Interruption
The interruption of a trend occurs when a trend line is no longer respected by the
price candlesticks. The first signal is when there is a close beyond the trend line.
Normally, the confirmation occurs when the next candlestick is completely outside the channel.
There are cases where false breakouts can occur, in which even after leaving the channel, the stock returns.
quickly and continues on its previous path.
The fact that an uptrend has been interrupted does not necessarily mean that it is starting.
uma tendência de baixa, e [Link] há uma tendência lateral entre elas.
High Channel
The uptrends are drawn after identifying the stock's trend. After drawing the uptrend line that touches the
the lower points of the candlesticks project another line parallel (or almost parallel) to the uptrend line.
que esta seja tangente aos topos dos candlesticks, envolvendo os candlesticks de preço em uma faixa de
variation, or channel. Prices vary like waves in these channels, and it's possible to "surf" these waves
buying (CALL) at the bottom of the channel and selling (PUT) at the top.

Low Canal
The low channel is the analog to the high channel. In a downtrend, it is obtained by drawing a line.
tangent to the lows of the candlesticks, parallel to the downtrend line. In this case, as the trend is bearish, one should
operating by selling (PUT) at peaks close to the downtrend line and buying (CALL) at lows close to the line
parallel.

Conclusion
Operating within the channels according to the trend of a stock 'surfing' on its waves can ensure
better results than just buying and holding the paper for the long term. Obviously this
strategy requires more monitoring of the role, but this should not be a problem, but rather a great
opportunity.
Support and Resistance

The concept of support and resistance is closely related to the

concept of supply and demand. It reflects the idea of buying low and selling high, intentions of any investor. How
It has been said that the market does not move in a linear way; it is composed of "peaks" and "valleys" that, according to its
main direction constitutes a larger trend.
These same waves are subdivided into oscillations of even smaller periods and amplitudes. The depths of the movements
previous ones allow for the prior identification of regions in the graph where there tends to be an increase in demand, the
inverse occurring at previous peaks, where there is an increase in supply. Thus, support is a point where the decline of
prices is interrupted by an increase in purchasing power, and resistance is a point where the rise in prices is
interrupted by an increase in sales force.
The analysis of support and resistance is the most important and significant indicator in chart analysis, as one
the trend tends to continue until some sign of its reversal emerges. And this sign will also be indicated on the line of
support or resistance trend. At a support level, investors assume that prices will evolve
for values above this point. In the case of a resistance level, investors estimate that the asset prices
evolve to values below this point.

However, one cannot interpret support and resistance levels as absolute limits to the trend of
prices. It is common for these limits to be broken, which is an important signal for the investor. Support levels
Support and resistance predict reversals when touched or mark a strong continuation of the trend.
prices when broken.
Stocks are the greatest mechanism for transferring wealth from the impatient to the patient.
Warren Buffett
We have a bullish indication when prices reach a support level and begin to rise, or, when they reach
a point of resistance and break it, rising even more. The indication of a decline occurs when prices reach a
point of resistance and they start to fall again, or when they reach a support and break it, falling even more. The levels of
support is generally old market bottoms or old accumulation phases. Resistance levels are
old market tops or old distribution phases. The longer prices trade close to these
levels, the more relevant resistance or support becomes.
By drawing the support and resistance lines, the investor defines what the market trend is (upward or downward). The
The goal when drawing the resistance line is to connect the largest number of price highs, and for the line of
support, unite the minimum price correspondents. Generally, a minimum of 3 points is enough to make
a reliable line, but the greater the number of points crossed, the greater its credibility will be.

It is important to define some psychological factors involved in support and resistance. By identifying them in
graphs, we know that many investors are willing to commit, buying or selling in a
determined level, which greatly increases our confidence in the operation. If the support or resistance points
as we know that many other investors made mistakes as well, which leads to a smaller impact on our self-
estimate. Thus, more than zones of buying or selling pressure, supports and resistances are levels of greater
psychological safety.
These levels will always exist. Learning to operate according to them will bring you great results. Thus, it is recommended...
I know that the analysis of support and resistance should be done from weekly charts over a period of 3 to 5 years, with the
the objective of defining the primary trend of the market, and subsequently, on the daily chart of the current year to define
the short-term trend. The larger the examined periodicity, the more significant its peaks and troughs are
mainly and, logically, also the levels of support and resistance. When in doubt regarding the trend
examine charts over longer periods.
This is the basis of graphical analysis, the rest of the indicators, such as candlestick and technical indicators (averages
furniture, stochastic, etc.), must be used to confirm the trend defined by these lines, having a
secondary function in graphic analysis.
Experience has shown me that large profits are obtained from assets that have indicated potential.
profitability since the beginning.
Jesse Livermore
How to Draw Trend Lines
The trend defines the direction that the quotes of an asset follow over a period of time, whether upward,
down or sideways. Trend lines are the most important tools of technical analysis, used to indicate
the most likely direction in which prices will develop. Thus allowing entry and exit from the market in
more favorable price levels. On the other hand, its breakdown is an important indication of a possible reversal.
of trend.
A trend formed by the price movement of an asset has successive lows and highs. The lines of
Trends should be drawn on the graph following these points. One should look for a sequence of peaks or troughs.
different, so that the reference points are not too close, and the more points the line passes through
better. The non-break of this trend line by the price line confirms the continuation of the trend of
prices. The breakout of a trend line is a sign of weakness in the price trend and the probability of
the reversal of this is high.

The support trend line indicates the minimum levels of

price that were reached in a trend. The resistance line indicates the maximum levels. Thus, when drawn
these trend lines are expected to keep prices within the limits established by them. When the
the price line falls reaching a support line and starts to rise again, we say that the support has been confirmed. When
It rises and hits a resistance line and falls back, we say that the resistance has been confirmed.
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.
defeat.
Sun Tzu

In addition, trend lines can be used to

make a future projection of prices and support and resistance points. The importance of a line is evaluated.
of trend through the analysis of 4 factors: its periodicity, its length, the number of times it has been
touched by prices and their inclination.
The longer the period, the more significant the line will be. A trend line on a weekly chart reveals
a trend more important than a trend line on a daily chart.
The longer a trend line remains unbroken, the stronger it will be. And the more...
extensive for, but its breaking will be more significant.
The more times it is confirmed by the price line, the stronger it will be.
The trend line cannot be too steep. A steep inclination requires the graph to develop.
very fast that he will not be able to maintain for a long period of time, making his cut by the prices easy and
quickly, without this meaning a change in trend.
There is no standard slope or predetermined limit, and its interpretation is subjective. Trend lines should
be redrawn whenever it is deemed necessary to make corrections, including in accordance with the considerations
above.

When we think we know all the answers, life comes and changes all the questions.
Verissimo
Operating with Support and Resistance

In a bullish trend, the resistance levels represent

pauses in the dominant movement, areas where selling pressure is greater than buying pressure, and that tend to be
overcome at a subsequent moment. In a downtrend, support levels are generally not able to
reverse the trend, but they can interrupt it for a while. The way to identify support consists of
largely due to the identification of ancient funds.
For a downtrend to continue, each successive peak must be at a lower point than the previous one.
anterior top. The failure to reach higher tops and lower bottoms, in addition to indicating weakness in this trend, shows a
Support point on the chart and a reversal may be near.
Support in technical analysis defines a price level, below which the asset is being traded, where the pressure
The buyer overcomes the selling pressure. As a result, the decline is halted and prices start to rise again.
Thus, an investor in the face of a bullish trend can buy near the support line when prices
they will start to go up again and, in the face of a downward trend, sell near the resistance line when the
prices will fall again, until the moment these lines are broken, then a reversal will occur in
trend.
In a downtrend, the breaking of a resistance line is a strong reversal signal for a trend of
high. And in an upward trend, the breaking of a support line is a strong reversal signal for a trend of
low.
In technical analysis, less is more. Keep things simple.
Jake Bernstein
In the chart beside, the break of resistance confirmed the reversal of the downtrend and the beginning of an uptrend.
high. The support line in an upward trend, when drawn, must pass through at least 3 price points
not very close minima.
For an upward trend to continue, each successive low must be at a higher point than the previous low.
previous. The failure to reach higher highs and lower lows, in addition to indicating weakness in this trend, shows a point of
resistance in the chart and, likely, a reversal may be near.
Resistance is the opposite of support, that is, it is a price level above which the asset is being traded where the
selling pressure surpasses buying pressure. As a result, the rise is interrupted and asset prices
They begin to fall. The way to identify a resistance consists largely of identifying old peaks.
In a downtrend, the breakout of a support line is a strong signal of trend continuation.
price drop. And in an upward trend, breaking through a resistance line is a strong signal of
continuation of the upward trend in prices.

In the graph above, the breakdown of support confirmed the reversal of the upward trend and the beginning of a downward trend.
The resistance line in a downtrend, when drawn, must pass through at least 3 price points.
maximums not very close.
There is no way to beat the market unless the trend is in your favor, from the moment of opening until the
closure of the operation.
Jesse Livermore
An interesting aspect of support and resistance is the change from one to the other in the event of a breakout.
Thus, a support level after being broken by the price line becomes a resistance level.
Consequently, a level of resistance after being broken by the price line turns into a support.
Support and resistance can be defined by horizontal lines drawn at the points of minimum, maximum and
congestion in the chart. When looking at a chart, the trained eye of an investor should quickly locate the points of
support and resistance, assessing their influence on price movement. Horizontal levels of support and resistance
Those that persist over time have greater importance and influence on prices than levels in short periods.
Some horizontal levels can remain unbroken for years. In the chart below, it is possible to see that the
resistance after being broken became the trend's support.

When the price of an asset reaches a peak, it is said to have tested a resistance. By touching it several times without
to be able to rise further, we have an indication of weakness in the upward trend and a sign of a possible reversal. To
hitting a bottom, they say the market is testing a support level. By touching it several times without breaking it, we have
a sign of strength in the market, indicating a possible reversal to an upward trend.
Support and resistance levels are often good opportunities to open and close positions. The break of
a resistance can be a signal for opening a new long position and a stop order can then be
placed below this old resistance, which has now become the closest support. This order can be
gradually readjusted below each new broken resistance during the upward process. A stop order that
was initially used to limit potential losses is now used to protect the profits of an operation.
When in a short position, a previous support level is a good place to set a stop order.
purchase. If this support is broken, one can open a new short position and a new buy stop order
can be placed at the previous support level, which has now become a resistance.
The most indispensable thing for a man is to recognize the use he must make of his own knowledge.

Trend Channels
This topic has already been discussed in part of a previous class, but we believe it is of utmost importance to revisit it in this one.
class, with more details, for its degree of great utility for trades in general.
The trend channel is a technique for graphically projecting the price trend. The evolution of the quotations remains
limited by a resistance line (upper line that connects a series of peaks) and a support line (line
inferior that connects a series of bottoms). A channel with a negative slope is considered a down channel,
while a trend channel with a positive slope is considered an uptrend channel.
Drawing a channel line is relatively simple. First, a trend line is drawn, then a
a line parallel to this, starting from the first significant top or bottom. Both lines move to the right
forming a channel. If at the next top formed the prices hit the channel line and then retract, it is
the trend channel is confirmed. The channel's slope can be upward, downward, or even flat.
In the case of an upward trend, it is a line drawn over the peaks along with a support line.

Here, after drawing both lines, we have a channel of

high.
In the case of a downtrend, a line is drawn tangentially to the lows, along with a line of
resistance tangenting the peaks.

Here, as soon as we draw the two lines, we form a channel of

perfectly operable.
When prices evolve through a lateral congestion, therefore without trend, we draw a line touching the
topos and another line touching the bottoms, and we form a perfectly operable lateral channel as well. When the
prices are moving in this way, forming a channel with a reasonable amplitude, creating the possibility of
trade with binary options, performing hedge operations and 2x1 operations, where in the same expiration, the trader
You can win on two operations; one from the PUT (on top) and another from the CALL (below).
We conclude therefore that the usefulness of the channel line is evident, as the investor can buy when prices
they reach the trend line and liquidate their position when they reach the channel line. In addition to serving for
project the prices of an asset in the future.
As mentioned, the support line of a channel tends to be a zone of buying pressure and the line of
resistance is a region of selling pressure, in addition to being an excellent point to place a stop order.
Selling. From this observation, one of the most direct ways to operate channels is to buy close to the support (line
buy when prices are low (bottom line) and sell when prices approach resistance (top line).
Analyzing these peaks and troughs within a channel with the help of other indicators, especially oscillators
like IFR and stochastic, you will notice that often the indicators will signal an overbought condition or
over-sell when prices are close to support or resistance. This indication reinforces the chances of
reversal at the end of the channel.
Another interesting technique is the conjunction of candlesticks with channels; when we find reversal patterns.
Near an extremity, the chance that support or resistance will hold is reinforced.
Eventually, there will also be opportunities when the channel line is effectively broken by the line of
price.

Gaps

Gaps are not just empty spaces in the charts. They bring
a series of important information that can directly influence the perception of traders regarding the
movement. Its interpretation can vary from a clear indication of strength to an expectation of reversal.
depending on the context in which the gap manifests.
When does a gap arise?
Assuming a daily time period, a gap occurs when the high of the current day is lower than the low of the day.
previous (downward gap) or when today's minimum is higher than the previous maximum (upward gap). Observing a
the gap in the graph is an empty space between consecutive bars.
Obviously, a gap can arise in other periodicities besides daily, such as intraday, weekly, monthly,
annual, etc. However, as the time interval increases, the gaps become increasingly rare. In order for it to occur, for
For example, a gap on the weekly chart cannot have an intersection of the prices of the 5 days of a week with the prices.
of none of the 5 days of the following week.
The Closing of a Gap
There is the idea that a gap will always be closed. However, in technical analysis, there is no room for certainty and,
consequently, we cannot trust that a certain gap will be promptly filled. After all, the closure
It can occur weeks, months, and even years later. In any case, it is undeniable the observation that it is overwhelming.
gaps are closed relatively quickly.
But what does it mean to close a gap? The closing or filling occurs when prices move again.
we remove empty space, see the figure below.

The main reason for the closure is the strongly aspect

emotional gaps. They show strength to one side, often generated from news that emerged
during the immediately preceding period. Many traders have an extremely emotional relationship with
their assets and operations and make little rational decisions.
Meanwhile, when the situation begins to normalize and the facts are analyzed in a more rational way, many
they realize that the decision was incorrect and begin to undo the wrong position. This behavior initiates the
reaction that often culminates in the total or partial closing of the gap.
Types of Gap
The technical analysis classified gaps into three basic types: breakout gaps, continuation gaps, and gaps of
exhaustion. Let's learn about the differences between each of them.
Breakup Gaps
This type of gap is formed when the price breaks a standard price or accumulation. It emphasizes strength.
buyer or seller of the new moment.

In the chart to the side, the breakout gap confirms the overcoming of
a resistance. It is desirable that the gap is accompanied by an increase in volume in the case of a bullish gap.
condition not necessary for downward breakdowns.
Continuation Gaps
Continuation gaps arise when prices are making a clear movement in one direction and with
speed. In this way, this is a type of gap that we find quite emotional, usually in rallys.
sudden drops.

In this ELET6 chart, we see two continuation gaps. One

care to be taken is that the emergence of the second or third gap signals danger, as the movement may be
using your last strength.
Next, we discuss the exhaustion gap.
Exhaustion Gaps
The exhaustion gap is associated with the end of the movement. As mentioned, the second or third continuation gap.
it can actually be a sign of exhaustion.
Special care should be taken if the gap is large compared to other gaps or if a downward gap occurs.
the next day leaving an isolated price bar. In this case, there is a reversal island. For the Japanese
It is a strong reversal candlestick pattern called the abandoned baby.
Support/Resistance
It is also worth noting that a gap tends to become a support/resistance zone. For the Japanese, a gap is
a window (Window) a continuation pattern and the entire area of the window is considered a potential pressure level
buyer or seller.
There are several techniques for gap exploration.
Always observe the gaps and also the context in which they appear.
They have a lot of information to help with their trades.

CLASS 3–GRAPHIC STANDARDS

Figures
We know that technical analysis aims to identify recurring price patterns with the goal of making a profit in the market.
Within these graphic patterns, there are several geometric formations that occur with some frequency and that
they usually signal the next price movement of an asset.
The graphic formations are divided into two categories:
Figures of continuity;
Reversal figures.
Let's address these formations separately.
Figures of continuity
First, what are continuity patterns? They are graphical patterns that represent a pause in the trend.
current, a moment of consolidation or price congestion. After this period, there is a greater chance of
continuation of the trend that precedes the pattern.
What are the main figures of continuity?
1–High Triangle (ascending);
2–Low Triangle (descending);
3–Symmetrical triangle;
4–Rectangle;
5-Banner
6–Flag.
High Triangle (ascending)
CLICK ON THE PICTURE!

The ascending triangle formation is a typically bullish formation that forms in an uptrend.
In terms of pattern, the ascending triangle formation consists of the following elements:
Upper Horizontal Line: in this standard chart there should be at least two peak points that are connected
they form a horizontal line. These points should have an approximate quotation and some distance between them. In
the period of time that separates them should have a minimum point
Uptrend line: there must be at least two points of successively higher price lows.
at the time, when united they form an upward trend line
Duration of training: the time period covered by this standard chart can range from a few weeks to several
months
Volume: tipicamente, à medida que se vai evoluindo no tempo, o volume vai diminuindo até ao ponto em que surge
the vanishing point. In this situation, if the volume increases, it means that the vanishing point is confirmed.
 Lower Triangle (descending)
CLICK ON THE PICTURE!

This triangle is exactly the opposite of the ascendant. It is

formed by a flat support line and an upper limit directed downwards and composed of a sequence
from descending tops. This is a sign that the price level can be exceeded by the 'bears' and not by the
"bulls." This level became the support level and the "bears" were gradually pulling prices down. The
The graph clearly shows how the peaks descend to the point where the price breaks the support level.
Symmetrical Triangle
The symmetric triangle is a continuation pattern that has developed in the markets and seems to have no
defined direction. The pattern contains at least two higher-lows and two lower-highs that seem
arise together. When the lines connecting these points are extended, they converge, giving rise to a
symmetric triangle.
The symmetrical triangle has implications for measurement and regulation. When the pattern is complete, the price and the
volume decreases before reacting sharply to leaving the limits of the triangle. When the break occurs,
prices tend to cover a distance equal to the base of the triangle or even more. From a time perspective, the
The gap of a triangle occurs between half and two-thirds of the distance from the base to the vertex, that is, the top.
of the triangle.

CLICK ON THE PICTURE!

The break can occur on any side of the triangle. In the case of a high symmetric triangle, the break occurs at
same direction as the previous upward trend. In the case of a descending symmetrical triangle, the breakout occurs in the same
direction of the previous downward trend.
Rectangle
CLICK ON THE PICTURE!

The rectangle characterizes the state of the market when the price varies between two lines, one of support and the other of resistance.
resistances, parallel to each other. The highs and lows form, in this case, a horizontal sequence. Unlike the
flag, the rectangles emerge as larger areas of consolidation, after a strong trend, and prices
they exit this pattern in the same direction in which they entered it.
The market continues in the same direction it had before the formation of the rectangle, usually when it has already gathered strength.
sufficient and is ready to continue the movement.
 FLAG
This is the most reliable pattern when it comes to the continuation of the trend. It forms a short period of consolidation.
after strong fluctuations. Thus, the flag is like an interval that arises after turbulent movements,
when the market sees the need for a pause due to the fact that the 'bears' or 'bulls' take part of
your profits. Since they do not do so simultaneously, a short trend emerges in the opposite direction. The flag
there is a trend contrary to that of the trend that dominated prices before its formation. However, the
a break of the flag line upwards or downwards indicates the continuation of the downward trend or
ascending, respectively. This is a signal for the "bulls" or "bears" to start opening long positions again.
or short. However, a sudden break in the opposite direction to what was expected is a signal of trend reversal.
As we can see in the figure below, the breakout of the upper line of the flag led to a trend.
ascending.
CLICK ON THE PICTURE!

FLAMULA
The pennant also represents a short phase of consolidation of the trend. This pattern occurs in very strong trends.
marked, after a strong market movement. The pennant is a short-duration trend, directed in
opposite direction but, however, there is no correction in it. The flag differs in the converging lines, which
On the flag, they are parallel. This pattern resembles a triangle, but it forms much faster than it.
CLICK ON THE PICTURE!

In the above figure, we can see how the flag is positioned in the opposite direction to that of the main trend, but in
entanto isto não é em si um fator importante. Muito mais importante é a direção do rompimento. Até porque a
The pennant can emerge as a trend reversal pattern.

CLASS 4 – REVERSAL GRAPHIC PATTERNS

Reversal in candlesticks
The candlestick chart not only provides a simple and practical reading of the price behavior of a
active, allows us to identify recurring graphic formations, such as reversal patterns.
Concept
But what is a reversal pattern? It is a chart formation of one or more candles that signals a possible
change in the direction of the price, not necessarily in the trend of the asset. This change can be, for example, a
reversal of the upward movement to downward or downward to upward.

Let's check some examples of what can happen after a reversal pattern emerges in a movement of
high. In figure 1, there was a lateral movement before reversing downwards. In figure 2, we had again a
lateralization, but this time with the continuation of the upward movement. Finally, in figure 3 the change in direction
the price was immediate.

High or Low Patterns

There are several reversal patterns in the candlestick chart, which are differentiated by names and also by
they will be classified as high or low.
The upward patterns signal the possibility of ending a recent downward movement and reversing to an upward trend.
low patterns indicate the possibility of ending a recent upward movement and reversing to a downtrend. The location and the
momentum on the chart is an important factor in the occurrence of these signals, as it increases the chance of reversal of
last movement.
Soon we will make an addendum, presenting and explaining in more detail each candlestick figure and its
function in a set and in a certain trend.
REVERSAL FORMATIONS
Addressing the next category of graphic formations, what are reversal figures?
They are graphic patterns that reverse a price trend. Therefore, when the figure occurs within a
an uptrend usually reverts to a new downtrend, as shown in figure 5.
Fig. 5

On the other hand, when the figure occurs within a downtrend, it usually reverses into a new trend.
of high, as shown in figure 6.
Fig. 6.
partial credit: [Link]
Examples:
Shoulder-head-shoulder
Among the existing reversal patterns, one of the best known among technical analysts is the Head and Shoulders.
Shoulder–OCO. The name comes from the pattern itself, whose figure apparently resembles the shoulders and head of a
person.
FIG. 7.

The Head and Shoulders–H&S–is a formation of trend reversal from high to low. It occurs when,
in an upward trend, a stock undergoes a correction from the current peak (head) that takes it to a lower level than
your previous top (left shoulder). Such correction usually brings it very close to your last bottom, and when returning to
rise, the paper does not have enough strength to continue the upward trend, falling back down (from the top of
right shoulder) when it reaches a height close to the left shoulder. The line that goes around the back in relation to the
head, forms the so-called neck line, which is usually parallel or blends with some support, but
it can also have a slight inclination. This reversal pattern is only confirmed when prices fall
consistently below the neck.

The formation analogous to the OCO when a stock comes from a downward trend and turns to upward is known as
Shoulder Head Inverted Shoulder - OCOI.
Fig.8.
An important signal for identifying these patterns, besides the formation of the right shoulder, is that generally the
Volumes indicate a trend opposite to the main trend. In the H&S pattern, the volumes are decreasing, and in the inverted H&S pattern the
volumes are increasing.
TOPOS AND DOUBLE BOTTOMS
Double Bottom or W is a pattern typically formed by 2 minima (A and B) interspersed by a maximum (C)
followed by the breakout of the resistance line. Generally, this pattern marks the transition from a
bearish period to a bullish period. This chart pattern is a reversal pattern.
trend, which means there should be a prior trend that should be reversed.

Double Top or M is a pattern typically formed by 2 highs (A and B) interspersed with a low (C)
followed by the breaking of the support line (D). Generally, this pattern marks the transition from the passage of a
high period to a low period.

TOPOS AND ROUNDED BOTTOMS

Tops and rounded bottoms are interesting patterns in technical analysis that announce, with some advance,
the price turnaround. Formations that take a little longer to materialize have some
advantages, we can highlight mainly:
Greater ease of identification by the analyst.
More time for trade planning (such as entry and stops).
Possibility of better profits. Generally, a longer formation precedes a wider movement.
Tops and rounded bottoms fall into this category, as they are constructed from various bars.
Let's get to know its characteristics in depth.
Price Format and Volume Standard
The figure below illustrates, on its left side, a rounded background (saucer in English) and on the right side a top.
rounded (ourounding top). In the case of the bottom, the curve line is drawn by connecting the points below the prices,
That is, under the minimums. At the top, in turn, the circular line is drawn over the maximums reached.
The rounded top is the inverse, maintaining only the characteristic of volume. In fact, if we analyze the relationship
between the volume and the prices we will promptly see signs of decline, after all, as it approaches the maximum the
volume decreases, expanding again when prices change direction. This and other characteristics
can also be found in the article about techniques with volume.
In the chart below, we see Acesita (ACES4) forming a rounded bottom. The volume is experiencing a slowdown.
to increase significantly as prices start to rise in sequence. Note how after the rounded bottom the
The prices range from approximately R$ 8.00 to about R$ 24.00.

Tops and rounded bottoms are patterns that show a gradual change in the supply/demand relationship of a.
active. Due to their slow movements, we hardly see breakouts and it is also complicated to identify.
clear levels of support and resistance. However, it is possible to detect them with some ease and after their completion,
Usually, a strong movement begins that opens up space for quite profitable trades.
In this lesson, we present the main patterns and the main price reversal formations of an asset;
there are several others, but since this is not an advanced course, but rather a basic theoretical course, we believe
with this we are paving the way for the natural curiosity of those who want to learn technical analysis, in the search and
in-depth research on the subject.