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Price Models in Technical Analysis Part III
21-01-2018 | No Views : 194
In the first and second part of the series of lessons for price models in technical analysis, we discussed the most important and most popular reflective price models that raise the possibility of a change in price direction if they appear. In this section, we will discuss the models of continuity.
It is worth mentioning that the continuation of the price patterns is an important sign that the trend is still strong, indicating that the probability of trend is the largest, and depends on many traders and traders in the construction of shopping centers and sales because of their credibility in predicting the movement of the price next.
Always remember, it is not preferable to rely on a tool alone in predicting prices to trade on it, as the more you use the technique of technical analysis you can get better results, and technical indicators help to improve the results and you can read the lesson on technical indicators, Consider the Japanese candle classes that let you read prices in a way and identify the strength of sellers and buyers.
Price Models ContinuityIn this section we will discuss the most important price models that you can rely on, which reflect the continuation of the current price trend, which enables you to enter high quality deals.
Triangle patterns in price models ContinuityThis type of price model has more than one type. There are three types of triangle model: Triangle, Triangle and Triangle. Although they meet as a sign of price persistence, there are differences between each type as we will explain below.
The Symmetrical TrianglesThis type of price model is characterized by a triangular shape when completed. This pattern is called a triangle of identical legs, as the price recedes between two descending lines and the other ascending the same slope as is evident in the attached picture.
It is worth noting that the triangle pattern is in both directions. It can be seen in a bullish direction indicating that the upside is still in place, and it could be formed in the bearish direction to indicate that the sellers are still controlling prices.
Configure the formAs mentioned above, the model comes in two directions, and in this part of the lesson we will take examples of the corresponding triangle which is formed in the upside.
- The model consists of a descending trend line with three peaks and a rising trend line touching three lows to show the pattern in a triangle.
- It must be in a clear direction and does not depend on it if it is formed in the absence of a clear direction behind it.
- The continuation of the price within the triangle until it reaches the last quarter weakens the model, as the price should breach the upper limit of the pattern before entering the last quarter of the triangle.
- The model is only completed by breaking the price to the top of the triangle.
Target Triangle ModelThe target of the triangle pattern is to measure the distance between the first and bottom of the pattern in the upside, and vice versa in the descending direction. The distance between the first and the top of the triangle is the distance between the two points in the triangle, The pattern is equal to this distance.
Thus, we have completed the first type of trigonometric pattern which is one of the most popular price models to be used in technical analysis.
The Ascending TriangleThe upward triangle is the second type of triangle pattern in the price patterns, and it comes in the upside as it indicates that the buyers control the price, which reflects that the probability of the uptrend of the price is closer to the reversal.
The price break of the upper limit of the pattern is a sign of the dominance of price demand forces after beating the supply forces, which may cause the rally to continue.
Configure the triangle triangle model
- The upper border of the pattern is horizontal based on three tops, and the bottom of the pattern is in the form of a rising trend line touching three lows.
- Must come in a clear upward direction.
- The modal form completes the price break to the top of the ascending triangle.
- The price trading in the last quarter of the triangle is a sign of weakness of the pattern, as the price must be breached to the upper limit before entering the price in the last quarter of the triangle.
The objective of the upward triangle price modelCalculation of the objective of the upward model is similar to the method of calculating the target of the corresponding triangle as the distance between the first top on the left and the bottom of the model, which is the two farthest points in the example, is measured as the distance the price is intended to rise after breaching the upper limit of the pattern.
The upward triangle in the falling marketAlthough the upward triangle is one of the continuous price patterns, it sometimes comes in a bearish direction. In this case, a reversal pattern causes the price to rise above its normal level. It is basically formed in the bullish trend to be in the category of classic models of continuity.
The descending triangle modelThe descending triangle model is an inverse image of the upward triangle, as it is also a classical continuation pattern, but it is in a bearish direction to signal that prices are still in a downward spiral and that the downside market is likely to remain close to the reversal.
Configure the triangle model
- The bottom border of the model is horizontal or has a slight slope based on three bottoms, and the upper border of the pattern is in the form of a bearish trend for three peaks.
- It must come in a clear bearish direction.
- The pattern is completed with a price drop below the bottom border of the pattern with a definite break with the day closing.
- The price trading in the last quarter of the triangle is a sign of weakness of the pattern, as the price must be broken to the bottom limit before entering the price in the last quarter of the triangle.
The target of the descending triangle price modelMeasure the distance between the two farthest points in the descending triangle representing the distance between or the top of the triangle and the bottom of the model. This distance is the expected target of the model after the price is capped to the bottom limit. The price is only 80% of the target. Before reaching 100% of the expected target.
Triangle upward in the upsideAlthough the pattern of the descending triangle when it is formed in a bearish trend is among the classical models of continuity, its emergence in the bullish market is a signal of price reversal. The formation of the price within the triangle is a sign of weakness of buyers and sellers' control over prices. The bullish may cause prices to fall.
So we have completed the third part of the Technical Modeling Series in Technical Analysis, in which we discussed the three types of the triangle price model, and in the next lessons we will address the classical models of continuity.
You can also view reflective price models in the first two parts, learn price models in technical analysis part one and learn price models in technical analysis part two.
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