Key price action patterns.
Below I will describe several key patterns, but in the diagrams you can see the analysis from a technical point of view.
And also pay attention to the rules, which I do not recommend ignoring.
The Cup with a pattern of handle is formed according to the following logic:
– In an up move, the bulls cannot move to the next resistance level, a correction begins. Impulse during a retracement is undesirable, a moderate downward movement should be observed;
-According to the basic rules, the lower part of the Cup must be formed in the area of correction levels. A deeper reversal is allowed on modified models. In the event of a deep correction after entering the market, the position is transferred to the break-even point as soon as possible, the probability that the trend will continue is less, it is better to make sure;
It all starts with the formation of a new low in a downtrend, after which a countertrend pullback occurs.
Then the price goes down again and rests against the previous low. And finally, after pushing from this level, an upward move begins, which breaks the level of the previous local high. It is after the breakout of this level (confirmation line) that the final formation of the ‘Double Bottom’ occurs and you can start buying.
The same goes for a reversal in a bull market. After the first high, the price should fall by at least 10%. Otherwise, it will mean that the bears are not strong enough.
Let’s start with the shape of the figure. Contrary to its name, the correct shape of the ‘Saucer’ figure looks rather like a bowl.
As you can see, the pattern is formed by smooth price movement along a parabolic path. The first half of the figure (the left side of the saucer) is a smooth descent from the edge of the saucer to its bottom. The second half of the figure (the right side of the saucer) is the same smooth elevation from the bottom to the edge. Ideally, the second half should be a mirror image of the first. And the bottom in no case should be sharp.
The classic ‘Saucer’ is formed, as a rule, in large periods of time starting from D1. But you can also find it in H1.
In trading, the term flat means an area on the chart, without a clearly defined direction of price movement, i.e. a trend. In other words, flat is the opposite of a trend.