Need help with identifying consolidation Patterns

#1
Hi guys, I am a relative beginner with Technical Analysis. Read quite a few books. In the books the charts & patterns so nice & clean & it seems like I understand them perfectly. But when I actually look at real life charts, I am totally unable to identify the patterns. In the books, they so neatly draw lines & identify the patterns.

Here is a stock (not Indian) with daily chart from 2013. I have attached both bar & candle charts for the same. It seems like there is consolidation going on for a few months & then there is a breakout in Dec with high volume. Now I am totally unable to figure out what consolidation pattern it is (if it all there is one)? How do I learn to identify it? When someone else draws lines, I am able to figure it out. But how do I do it myself? Any help will be appreciated.

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anil_s_trivedi

Well-Known Member
#2


Let me try it out...

Assuming this is the only stock history we have. Stock made first bar on extreme left mark in yellow. Then made high at 1. Then have big sell bar but volumes missing. We mark point 1 as lifetime high for the stock. Now whenever stock moves above the said zone it would be sign of strength.

We have point 2 with gap down on high volumes but follow up selling missing. Probability of testing towards point 1 is high now. But stock goes sideways and made point 3. again on high buy volumes as closing higher than previous day. But no follow up on upside. Again sideways then moved down.

We have point 4 in picture as stock breached its listing days low, indicating weakness but volumes on downside is missing. Failure here means first point of testing is towards point 3. Again crossing point 3 there was low volumes indicated by yellow region in late november.

If suppose prices still had moved upside on these volumes it may have followed arrow path shown. But what prices did is it gone sideways in december and then broken All time high zone as shown. This was indeed a resistance zone as watch volumes, it have unprecedented high volumes to cross that point 1 resistance.

Trade is now on at breakout & retest opportunity coming in.This is conservative trade.

For aggressive ones, opportunity was at after bar 4 when failed breakdown at point 4. or on sideways consolidation breakout in december.

This is basic level analysis with any stock . If you had seen thousand of charts you can remove volume panel from the picture still you can identify those trades.

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Identifying patterns is not holy grail. Every pattern is prone to failure. Master few and trade them well. Of all patterns i love to trade flags, rectangles, cup & handle, VCP. I need low volumes inside pattern. more i am comfortable with it. Most of useless pattern i think personally is head & shoulders. It may be debatable.

Textbook patterns are good for selling books and doing after event analysis. Many of writers who write books are not traders or investors. Posting accurate charts is a myth. sooner you get this better for your financial health.

Also, i never suggest leaving jobs at hand & going full time into market. Lastly trade in cash segment stay away from F&O. And learn risk management. Never ever fall in love with stock. You will fall into pit alongwith it...
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#3
Thank you for the detailed reply.

Master few and trade them well. Of all patterns i love to trade flags, rectangles, cup & handle, VCP.
Do you see any of these in the charts above?


I need low volumes inside pattern.
What is Low Volumes Inside Pattern?

Also, i never suggest leaving jobs at hand & going full time into market. Lastly trade in cash segment stay away from F&O
Yes, of course.
 

anil_s_trivedi

Well-Known Member
#4
Thank you for the detailed reply.


Do you see any of these in the charts above?




What is Low Volumes Inside Pattern?


Yes, of course.

Do you see any of these in the charts above?

Yes, there is a big rectangle between yellow line and lower line at point 4. This can also be classified as Cup with handle with handle at sideways action of december. And then breakout from the handle.

What is Low Volumes Inside Pattern?

Stock cycle is such that first stock run from 20-100 for example.and then go sideways or correct in a sideways or make pattern here between 100-80 zone. Be it any pattern, for example flag. Than volume bars inside this flag should have low volume bars compared to the volume bars when the stock was running up from 20 to 100 price. It simply means there is big selling going on.
And if you spot any big sell bar ( Closing below previous day close with high volumes) then it should have follow up on downside. else its a shakeout or trap.
 
#5
Hi ,

I trust you are safe and well in these difficult times.

Consolidation patterns describe the movement of a price oscillation in range. It is the indecision of buyer n seller and the price moves sideways during this period. Within this sideways range, pattern formation happens & ends up in price breakout, when the price of the stock moves above or below the trading pattern /Range.

Sharekhan Provide one tool called Pattern Finder. Pattern Finder helps you to identify / Scan chart patterns. Not only that, but you can also set an alert. You scan on base on candlestick/oscillators . and much more.

For education & Knowledge purpose, I have created a small video about that tool. I hope this helps! >>



DISCLAIMER

All views expressed on this are personal & for information/Education purpose & my own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated
 

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