How to read the market?
- September 5, 2023
How to read the market?
Crypto Chart Patterns
Twenty-seven known trading patterns have multiple time intervals (15 minutes, 1 hour, 4 hours, and one day), saving ample time.These are the 27 types of charts: Ascending / Descending Triangle, Channel Up / Down, Falling / Rising Wedge, Double Bottom / Top, Triple Bottom / Top, Bullish / Bearish Flag, Bullish / Bearish Pennant, Rectangle, Support / Resistance, Big Movement, Consecutive Candles, Drive, Butterfly, Gartley, ABCD, 3 points Extension/ 3 point Retracement.
Two or more equal highs lead to a horizontal line at the top; two or more rising troughs form an ascending line meeting the horizontal line. The pattern can only be seen only when there is an uptrend (i.e., bullish market)
Two or more equal lows lead to a horizontal line at the bottom; two or more declining peaks form a descending line meeting the horizontal line. The pattern can only be seen when there is a downtrend (i.e., a bearish market).
Symmetrical triangles are the patterns that form in the market when there is no sense of direction (if the market is bullish or bearish). Also known as the period of indecision, all lows and highs come together at a point, forming a triangle with low volume. As a result, many investors are confused about what position to take. And if the investors take a risk and go towards north or south with significant volume compared to volume leading up to the breakout.
Head and Shoulders
Three successive peaks start with a lower peak and then a higher peak and back to the lower peaks. So there are two lower peaks of approximately equal height and a middle peak that scales the highest. It is responsible for uptrends and downtrends, leading to a bullish to a bearish market. The crown and shoulders pattern is one of the most trustworthy trend reversal patterns.
Inverse Head and Shoulders
There are three successive peaks here the first peak is the highest, the second is the lowest, and the third peak is easily as high as the first. It is responsible for a downtrend and later gives a signal for a reversal (i.e., from bearish to bullish)
Channel Down and Channel Up
It is a trading range between diagonal parallel lines. It only happens when parallel resistance and support lines create an up or downtrend. It only means that either it’s a possible reversal in the trend or the current trend will change in the slope.
Bullish and Bearish Flag
Short-term or shorter time intervals are miniature rectangle trading ranges between diagonal parallel lines. The move goes against the prevailing price trend observed in a larger time frame on a price chart. It only happens when the trend takes a sharp advance or decline and then will indicate a small change in direction, also known as areas of consolidation. After that, the trend continues.
Flag patterns can only be downward trending (bearing flag) or upward-trending (bullish flag). The flag pattern is the best and most reliable continuation pattern that traders use as it generates a setup for entering an existing trend that is ready to continue.
It can be defined by two converging lines slanted downward. Usually, the trend takes a down steep and a potential bullish market opposite the original downward trend. However, there can be an opposite uptrend, which implies that the trend will continue. It doesn’t matter what happens in the market Falling Wedge will result in a bullish breakout. A Falling Wedge is a better indicator than a rising wedge.
When two lines converge and slant upward. It usually happens after an uptrend but sometimes occurs during a downtrend. When there is a decline in volume, the prices rise through the pattern (i.e., volume/price divergence). A rising wedge typically results in a downtrend (bearish)
Double bottom is two consecutive, roughly equal troughs with a midlevel peak in between. It also resembles a W shape. It is a very powerful trend and always occurs after an extensive downtrend. It represents a reversal pattern that indicates a minor, if not long-term, changes from a downtrend to an uptrend (i.e., bullish). A spike in volume occurs during the two upward price movements in the patterns. These spikes in volume strongly indicate the upward price pressure and help confirm a successful double bottom pattern.
Suppose two consecutive peaks of equal heights with a moderate trough in-between. In that case, the shape resembles an “M.” It is a powerful chart pattern and only happens after a long uptrend and often represents a reversal pattern that means the market will now see a downtrend, going on for a long term or short term—leading the market to be bearish.
Suppose there are three consecutive lines that of approx. Equal height, and at first, it resembles a double bottom. These ups and downs showcase failed attempts to break through an area of support. A decreasing volume follows every test until a breakout in price happens with the increase in volume. The pattern only happens after the downtrend, and an indicator that represents the reversal pattern that indicates a long term or a short term of a downtrend to an uptrend means a bullish market.
When there are three consecutive, approx. equal peaks, it resembles a double top. The peaks are an example of failed attempts to break through an area of resistance. Each resistance test is typically accompanied by decreasing volume until a breakout in price occurs with an increase in volume. It happens only after an extended uptrend and mostly is responsible for a reverse in the pattern that focuses on a short term rather than a long term indicating a downtrend than an uptrend, meaning a bearish market. In this method, the trading volume trends should also be employed to confirm the strength of the indicator.
Bullish and Bearish Pennant
It is a small converging symmetrical triangle also known as Pennant. It usually forms a sharp advance (bullish)/ decline (bearish), followed by a brief triangular-shaped consolidation in a price (a slight change in direction), and before there is an uptrend (bullish) / downtrend (bearish) continues. The time of consolidation should have lower volume, and the breakouts should occur on higher volume. If there isn’t a flagpole (sharp decline/ advance), it’s a triangle and not a Pennant. Also, Pennants are different from a triangle rather than a short-term pattern.
The rectangle pattern indicates that there is a pause in a pause in trend as the prices start moving sideways between a parallel support and resistance zone. The pattern usually represents a consolidation in price before continuing in the original direction of the ongoing trend.
Support / Resistance
The key levels usually are resistance areas or horizontal support areas. It indicates that the peak or troughs in the price graph line up with a horizontal psychological barrier. The support and resistance lines are critical concepts in technical analysis. These are areas where buyers deem an asset attractive to buy (support) or too expensive (resistance).
The ABCD pattern captures the classic rhythmic pattern of the market in work, and the traders use it to identify trading opportunities. Since ABCD patterns work on different timeframes, they are widely used and form in both market downtrend and uptrend. ABCD is derived from the category of harmonic pattern that consists of two equivalent price legs.
The butterfly pattern shows you if there is an ending of a price movement, meaning that you have the opportunity to enter the market during the reversal of the price.