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Price Models in Technical Analysis Part IV
21-01-2018 | No Views : 59
In the first and second part of the series, we studied the price models in the technical analysis of the reflective price models, and with the third part we began to deal with the continuity patterns, whose formation is a sign of the strength of the trend and the continuation of the price movement in the same direction.
In Part 4 of the Price Model Learning Series in Technical Analysis, we will continue to talk about continuity models as another tool to help predict future price movement.
Price Models Continuity
Pennants ModelThe flag pattern is another pattern of continuous price patterns. It is characterized by its large formation on the chart. When the pattern is formed, it is a sign of a temporary pause after a sharp move, as the pattern is formed after a sharp upward or downward movement.
The model of the flag is similar to the corresponding triangle model, but the variation is in the formative period. As we mentioned in Part 3, the triangle model is formed in a period of more than 6 weeks, while the flag model is formed in a short period of two to three weeks In a bullish trend, while it could be formed in a shorter period in the descending market up from two to three weeks.
Configure the pennants form
- The flag pattern consists of a rising trend line below the price and a bearish trend line above the price to limit prices within.
- The model must come after a sharp upward movement or a sharp bearish move.
- The pattern is confirmed by the breach of the price to the upper limit in the upside direction, or breaking the bottom border in the bearish direction.
- The formation of the pattern in the bullish trend from two weeks to three weeks, and in the bearish trend from one to two weeks.
Target of pennants modelThe pattern of the flag is in the middle of the trend, so it is possible to determine the target by measuring the previous movement of the model, so that the target is equal to the distance. For example, if the pattern is in a bullish direction, the beginning of the bullish movement is measured from the beginning of the move until it is The model, when the price is breached to the upper limit, the mentioned distance is the expected target.
Remember that it is not important to wait for 100% of the target to be achieved, and only 70 or 80% of the target can be satisfied, since the price can be reflected before the target is fully achieved.
Thus, we have finished the pattern of the banner which is one of the many price models on the chart which can be relied upon to confirm that the trend is still continuous, and can be traded with the integration of other technical analysis tools to get the best results.
Flag modelThe model of science is similar to the flag model mentioned above in the conditions and target setting, since it also from the price models continuity and comes in half the direction, and consists in a short period, but it differs in that it consists in the form of a channel opposite the price, if the upward trend is the channel down, And vice versa if the trend is bearish the channel is bullish.
Form the flag model
- The model is formed in the form of a reverse channel.
- The model comes after a sharp price move.
- The duration of formation of the model in the bullish trend from two weeks to three weeks, and the duration of formation in the downward trend from one to two weeks.
Target of Flag ModelThe pattern of the flag of the price models that come in the middle of the trend, so the distance before the model is measured from the beginning of the sharp movement, to be equal to the target distance to which the price is expected to reach.
Wedge ModelThe Wedge pattern is also one of the most famous classical models of technical analysis, which many technical analysts and trading traders rely on, because it has credibility and is a good tool when combined with other technical analysis tools.
The pattern of the wedge is similar to that of the corresponding triangle in the configuration and many of the conditions. Although the two types of price models are the continuation, the wedge model is different in its slope, as it tends to reverse the price direction, if it is in an upward direction, In a bearish direction its direction is upward, as is evident in the picture attached.
The bearish pattern is called the descending wedge, and the upward wedge is applied in the upside.
Configure the Wedge Model
- The pattern consists of two lines, one of which is bullish and the other is bearish. The price is formed to form a triangle. The triangle is reversed. If the price trend is bullish, the triangle is bearish. If the price is bearish, the trend is bullish.
- The duration of the form is from one to three months.
- There must be a clear prior price direction, if the pattern is in an over-arching direction.
- The pattern is completed by breaching the price to the top of the pattern in the bullish direction, and breaking the bottom limit of the bearish trend.
The target of the wedge modelTo measure the target after the completion of the wedge pattern, the two farthest points in the model are measured to be the distance to which the price is expected to reach.
The wedge model as a reflective modelAlthough the wedge model is a continuation of the price pattern, in rare cases it is a reversal pattern. This occurs when a pattern is formed and a descending trend in the direction of the pair is a sign that the trend may be reversed. Prices, to perform the function of reflective price models.
The Rectangle FormationThe rectangle model of price models is a continuity that is easy to identify, since it consists of two support lines and a resistance to the price to form the pattern, which comes in the general direction to be a signal of a pause in the price before the completion of the model.
Configure the rectangle form
- The rectangle pattern appears in both the upside and the descending directions.
- The model represents a three-point contact support line with a three-point resistance line, thanks to a rectangle with three bottoms anchored on the bottom border with three peaks touching the top of the model.
- The duration of model formation ranges from one to three months.
- The pattern is completed by breaching the upper price in the bullish direction, and breaking the lower border of the pattern in the bearish direction.
The object of the rectangle modelThe objective of the rectangle model is equal to the distance between the upper and lower limits of the pattern. For example, if the pattern is in an upward direction and the distance between the upper limit and the bottom limit is 100 pips, the target price after breaching the upper limit is 100 pips.
Remember, it is not preferable to wait until the target is 100% achieved, since it is possible that the price will be reflected before achieving the full target.
Dear reader, we have completed a series of price learning lessons in the technical analysis, which enables you to predict the future movement of the price to be able to determine if the probability of continuation of the trend is closer or reflection.
The first and second part of classical modeling lessons in technical analysis deals with reflective price models, which make you able to anticipate reflection, and deal with patterns of continuity from the learning of price models in technical analysis part three.
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