Autochartist Forecast
Understanding support and resistance in chart patterns
Patterns are the result of support and resistance. They develop from horizontal support and resistance and trendlines.
Pattern analysis as it applies to charts would involve for example understanding that a symmetrical triangle is the convergence of an uptrend and downtrend line. Applying this understanding could lead to triggering a breakout or breakdown trigger.
When a trade is triggered with a triangle pattern, confirming a trendline break is relatively simple. And identifying a support and resistance level forming the shape of a rectangle is more obvious than seeing the implications of a wedge, channel down or channel up.
It helps to know which lines and levels to focus on and whether the pattern is forming in a trending or sideways market.
A wedge pattern occurs in a trending market, therefore the downtrend line in a falling wedge and the uptrend line in a rising wedge is where the focus should be as it is the backbone of the pattern. The trending market points to a continuation pattern, however reversal trades from rising and falling wedges, as well as channel up and down patterns can be very powerful if set up correctly.
It is important to know that wedges and up/down channels form in an uptrending or downtrending market. Trading a pattern that forms in a trending market is very different from trading a consolidating or congestion pattern. When trading a pattern like a wedge, a trader can choose from two distinct entry styles: correction entries that are corrections within the trend so one can capitalize on buying pullbacks in an uptrend or bounces in a downtrend; or reversal entries which are more similar to breakouts and breakdowns.
For further information, visit www.autochartist.com
Pattern analysis as it applies to charts would involve for example understanding that a symmetrical triangle is the convergence of an uptrend and downtrend line. Applying this understanding could lead to triggering a breakout or breakdown trigger.
When a trade is triggered with a triangle pattern, confirming a trendline break is relatively simple. And identifying a support and resistance level forming the shape of a rectangle is more obvious than seeing the implications of a wedge, channel down or channel up.
It helps to know which lines and levels to focus on and whether the pattern is forming in a trending or sideways market.
A wedge pattern occurs in a trending market, therefore the downtrend line in a falling wedge and the uptrend line in a rising wedge is where the focus should be as it is the backbone of the pattern. The trending market points to a continuation pattern, however reversal trades from rising and falling wedges, as well as channel up and down patterns can be very powerful if set up correctly.
It is important to know that wedges and up/down channels form in an uptrending or downtrending market. Trading a pattern that forms in a trending market is very different from trading a consolidating or congestion pattern. When trading a pattern like a wedge, a trader can choose from two distinct entry styles: correction entries that are corrections within the trend so one can capitalize on buying pullbacks in an uptrend or bounces in a downtrend; or reversal entries which are more similar to breakouts and breakdowns.
For further information, visit www.autochartist.com
4 August | 
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