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Three Change In Trend Chart Patterns To Profit From

Three Change In Trend Chart Patterns To Profit From

Courtesy of David Grandey

Change In Trends

Eventually all trends change. If you are short at a market low you need to know when to cover and get out. Likewise if you are long at a market high, here too you need to know when to get out. This is where Change In Trends patterns come into play.

 
At All About Trends typically there are three chart patterns we look for when it comes to change in trends. Considering we are at one-year highs we’ll focus upon change in trends from up to down. Those three chart patterns are: Double TopsTrendline breaks and First Thrusts Down. Below are examples of each.
 
Double Tops 
A Double top is just that. There are variations to this pattern though. One such variation is that of a shake out high. This is where an issue breaks above the prior high by a smidge and then rolls back over much like a shake and bake. The other variation is that of a continuation high. This is where an issue is further along in a correction then goes thru a rally period much like a snap back rally then proceeds to put in a double top an rolls over.

Below is a recent example of a name we shorted earlier in the year and below that is a continuation double top example 

Below is DRYS in a continuation double top. As you can see the issue has been in a correction for months then gets a retracement rally and that retracement rally ends with a double top. 

Trend Line Breaks
This is rather self explanatory in the sense that it’s simply all about a trendine break. Just remember bigger is better. The bigger the pattern in time duration and scope the better. Just take a look at TSL from January.

 

First Thrusts Down

This is when an issue is in a clearly defined uptrend that all of a sudden falls to either a prior support level or the 50 day average as in the case below (The Blue Box is the first thrust down), then it proceeds to make a rally attempt (Everything above the pink line). We call that rally attempt a snapback rally too by the way. Upon a break of the pink line it’s what we like to call bombs away. That trendline break is your short-sell trade trigger.

 

In a larger sense see what NEU is doing? From the January highs through the February lows one could say that is a monster first thrust down, and everything above the pink line off the February lows is a big snapback rally. 

For you Elliot Wave ABC fans the Big First thrust is the A down, with this recent snapback being the B wave and here comes the C wave down upon a break of the Pink line. We sure would love to see a retest of the recent highs around $107 but the market is the boss and makes that call not us. In so doing by the way that would complete our continuation double top example.
 

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