This article continues to introduce other common technical analysis patterns, including M heads, W bottoms, triangle patterns, etc. I hope it will be helpful to friends who are still unclear about the concept of patterns~
Dual type
Double Top (or commonly known as M head)
It is a top pattern. When it appears, it is a signal to enter the market for short selling. Its formation process is as follows:
After the price rose, a large amount of profit-taking selling pressure began to appear, causing the stock price to fall back from a certain high, forming a left shoulder.
After the pullback, some investors began to buy at low prices, driving the price back up. However, the buying power was insufficient, preventing the price from breaking through the previous high (left shoulder). The trading volume was also not as good as the left shoulder, and the right shoulder gradually formed.
After the right shoulder was established, the strength of the bulls continued to weaken, and the price began to fall. As the trading volume increased, the price fell below the neckline to form an "M head", and the short side pattern was established.
When the stock price confirms that it breaks through the neckline and moves downward, the neckline will easily turn from a support to a pressure line. At this time, you can try to enter the market for shorting and set a stop profit and stop loss point. The following is a commonly used reference for M head stop profit and stop loss:
Stop profit point: Generally speaking, double the distance from the highest point of the M head to the neckline is taken as the stop profit point.
Stop loss point: There are two types. If the short seller enters the market when the right shoulder pattern is formed, he or she can first set a stop loss point above the M head to avoid a reversal before the M head pattern is established. The other stop loss point is set above the neckline to prevent false breakthroughs. The distance from the neckline varies depending on the person's risk tolerance.
Double Bottom (or commonly known as W bottom)
It is a bottom pattern. When it appears, it is a signal to enter the market and go long. The formation process is as follows:
After the price fell, a low entry buying order appeared, and the price rebounded to form the first foot (left foot).
After the price rebounds, buying is unable to continue, causing the price to fall. At this time, the trading volume is usually reduced, but the price has not yet been lower than the left foot, or is parallel to the left foot, and then begins to rise again, forming the second foot (right foot). ).
After the right foot is formed, the strength of many parties becomes stronger, and the price gradually breaks through the rebound high point of the left foot, which is usually the neckline position. After the breakthrough, the pattern is established and attracts more buyers, and the trading volume also explodes to form a "W bottom".
When the stock price confirms that it breaks through the neckline and goes upward, the neckline can easily turn from pressure to support. At this time, you can try to enter the market to go long, and set a stop-profit and stop-loss point. The following is a commonly used W-bottom stop-profit and stop-loss reference:
Stop profit point: Generally speaking, double the distance from the lowest point of W bottom to the neckline is taken as the stop profit point.
Stop loss point: There are also two types. If you enter the market to do long when the right foot appears, you can first set a stop loss point at the lowest point of the W bottom to avoid a reversal before the W bottom pattern is established. The other stop-loss point is set below the neckline to prevent false breaks. The distance from the neckline varies depending on the person's risk tolerance.
Other types
In addition to the more common patterns mentioned above, there are also "box patterns" and "triangle patterns" that are in the consolidation stage. Triangles are divided into "ascending triangles", "descending triangles" and "symmetrical triangles". "Wait, there are all kinds of graphics. Since the causes of these forms and subsequent development directions are relatively complex, we will not go into details here due to space limitations.
In short, although there are many types of patterns, the principle behind them is to observe the K-line chart shape and the increase and decrease of trading volume (usually a price drop is accompanied by a decrease in volume, and a price increase is accompanied by an increase in volume). It is healthier and the subsequent trend will last longer.) After a specific pattern appears and establishes a trend, then enter the market to do long and short positions, and set profit and stop loss points according to different shapes of pressure and support lines to earn short-term profits. The price band spread of the market. We have used two articles to briefly introduce some common technical forms, and in the next article we will introduce several common "technical analysis schools", including "Dow Theory", "Elliott Wave Theory", " Granville's Eight Principles" and so on. Stay tuned!
