Trading Strategies Using Technical Analysis

Failed Double Top - Daily Pattern

Failed Double Top - Daily Pattern


Tools Candlestick/Bar Chart (Daily), Colour Coded Volume, 21 and 50 SMA

Trade Setup This is a very powerful EOD setup which I came across during my early days of trading. It is one of my favourite EOD trading strategies. To walk you through this setup, I am going to explain it to you in various steps.

1. Trend Determination - There has to be a 'trend' in place for an effective reversal to kick in. Hence, the first step of this setup is to identify stocks which are trending. You can either do this through a trend line or you can use the method which I use. I usually plot 2 SMA (period 21 and period 50) and determine the trend of the stock by the slope of these averages. If 21 SMA and 50SMA do not touch for a while and both exhibit slope greater than 25 degrees, then the stock is in a very strong up trend. These are the kind of stocks we want to choose for this particular strategy.

2. The Pull-Back Phase - After, a descent run up, the stock forms a new high (1st Top) with heavy volumes and retraces back to the 21 SMA or 50 SMA. Usually the stock does not touch the 50 SMA. The stock usually forms a candlestick reversal pattern and head's off to make a new high.

3. The Trap (Top) - As the name suggests, this is the phase where a New High is formed. This is a new high, which is formed on very light volume and convinces many traders as a genuine high (breakout). It is here when many traders enter long positions in anticipation of a price rise. What essentially happens is that the prices fall back below the first top (within 2 days) and continue to slide down to the previous swing high. This dents the confidence of those who went long on the new highs and usually panic selling kicks in. The gain is quick in the set -up and the risk reward ratio is amazing.

Example - Oriental Bank recently formed this pattern. The stock was in an uptrend from september as determined by the slope of averages. The volumes at first top were high whereas at the second top they were low. The stock price fell below the previous top within 2 working sessions. Finally it fell back to the previous swing high.

Important Notes Do NOT forget to look at the trend of the stock and the volumes. Finally, the prices must fall back within 2 days below the first top.

Stop Loss - Keep a strict stop loss of a close beyond the high of the 2nd top.

re: "Trading Strategies Using Technical Analysis".

Just now i have finished all your setup in this thread!
i want to appreciate your effect for presenting those setup
in simple with neat presentation!:clap:
Soon this thread will be reference for many beginner,keep
your good work! :thumb:

Thanks

I'm glad this thread is of some use to you.

Keep it up and thanks for the compliments.

Tc.

Is YesBank making rectangular pattern?

Chart: Daily Bar Chart
Indicator: Stochastics,MACD,ADX,Volume



Thanks

First of all good work.

Now look above. How about an ascending triangle ?? Look at the black lines.

The key here is the present leg of wave being formed. This will determine whether we r in a horizontal range or ascending triangle. As of now just wait and watch. My gut feeling is that Yes Bank is trading a bit weak. If it takes out the current high on good volumes then the price would (and should) rise dramatically. But since it is little weak (not too much though) on daily charts, I'll wait n watch this script carefully.

One more thing ... your horizontal range isn't right .. thrs one bar (around 1) which is out of the range. Though some may say this is allowed, I'll still tell u this is not that valid. Rest time will tell . We'll track this script .

i am monitoring MRPL for Intraday!
how do i interpret this chart whether
Triangular Patter or Correction?



Thanks

83.4 is the current swing low ... now it is trading above that level but also in symm triangle zone. One the price breaks down from the symm triangle, wait for 83.4 to be taken out. If on retracement the prices do not re-enter the sub 83.6 levels , then short it. MRPL is relatively under performing the NIFTY. So it should be a good trade.

But why are you running behind intraday trade ??

Thanks

i am following 5 E-wave and correction.
problem is mostly after wave 4,it falls into
complex correction with triangular pattern.
so i put that question with chart.

if previous swing low or high taken out
by progressing complex correction .then
it is end of complex correction?

Yes. You will have two factors on your side.
1. Triangle breakout (strong sign)
2. Prev Swing low taken out (again a strong sign)

Add up volumes to check validity.

Tc

I had told you guys that I was trying a system which I had mentioned in My Stock Watch list thread. Well, since this is in testing phase, I'll post my list here.

The beauty of this system (mixture of Trend Following Systems and Mean Reversion Systems) is that it gives returns within 1-4 day of trades. It's a real time scan system and hence positions have to be taken between 15.15 - 15.30. I have got in house development done for the system's software. I'll be posting my results live here and will certainly release the system (with software) once it is successful. Results on backtesting the data were very good. But it is necessary to see if it works in real time. At times this system generates contradictory signals. Eg: If it gives BUY for a security on 4th Jan and then short for the same on 6th Jan, then earlier position have to be closed and new positions should be added. At present am tracking only 40(high beta stocks). I hope it works. Here are results for January along with today's results. CMP indicates closing price of signal generation day. Stop Loss is based on EOD prices.