Three Change In Trend Chart Patterns To Profit From
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.
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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