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© Copyright 2013. Lance Beggs. All Rights Reserved.
YTC - Introduction to Trading -
Technical Analysis
Module 4: Chart Analysis
Part F: Charting Patterns (Macro)
1
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Disclaimer
• Before commencing this course, please familiarize
yourself with the full disclaimer at the following
webpage:
http://www.yourtradingcoach.com/Disclaimer.html
• If you are unsure about the contents of the
disclaimer, please contact me via
Disclaimer
• The information available on our website and any of our
products is GENERAL COMMENT ONLY, for the purposes of
information and education.
• We don't know you so any information we provide does not
take into account your individual circumstances, and
SHOULD NOT BE CONSIDERED ADVICE.
• Before investing or trading on the basis of our material, we
encourage you to first SEEK PROFESSIONAL ADVICE with
regard to whether or not it is appropriate to your own
particular financial circumstances, needs and objectives.
© Copyright 2013. Lance Beggs. All Rights Reserved.
Introduction
• What are Charting Patterns?
5
Symmetrical
Triangle
Flag
Charting patterns are simply common patterns which
we can see within price movement.
They provide some structure to the charts that will
assist us with both our analysis and our trading.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Introduction
• What do I mean by Macro?
6
Symmetrical
Triangle
Macro Large Micro Small
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© Copyright 2013. Lance Beggs. All Rights Reserved.
• Analysis
7
The Aim of Using Chart Patterns
Double
Top
1 2
3
4
Price target achieved
Chart patterns provide structure to the price
movement and allow us to project forward in time
to identify future price targets.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
• Trading
8
The Aim of Using Chart Patterns
Double
Top
1 2
3
4
Profits taken at projected target
Chart patterns also identify trade opportunity,
allowing us to enter on a breakout of the pattern,
targeting the analysis price projection.
Trade
entry
selling
short
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1. Trend
2. Pattern
3. Breakout
4. Trend
10
Stages of a Pattern
TrendTrend
Breakout
Pattern
Trend
Pattern
Breakout
Trend
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1. Reversal
2. Continuation
11
Types of Pattern
Uptrend
Reversal Pattern
Uptrend
Continuation Pattern
Downtrend
Uptrend
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Double Top
13
Pattern Type:• A reversal pattern at the top of
an uptrend.
Description:• Price forms two swing highs at
approximately the same price
level.
Confirmation:• The pattern is confirmed on a
break of the intermediate swing
low.
Projected Target:• The distance from the swing
highs to the intermediate swing
low is projected down from the
point of breakout.
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14
Double Top
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© Copyright 2013. Lance Beggs. All Rights Reserved.
15
Double Top
Uptrend
SW - H
SW - H
Intermediate
SW - L
Breakout
Target
ProjectionTarget
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Double Bottom
17
Pattern Type:• A reversal pattern at the bottom
of a downtrend.
Description:• Price forms two swing lows at
approximately the same price
level.
Confirmation:• The pattern is confirmed on a
break of intermediate swing
high.
Projected Target:• The distance from the swing
lows to the intermediate swing
high is projected up from the
point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
18
Double Bottom
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© Copyright 2013. Lance Beggs. All Rights Reserved.
19
Double Bottom
Downtrend
SW - LSW - L
Intermediate
SW - H
Breakout
Target
Projection
Target
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Triple Top
21
Pattern Type:• A reversal pattern at the top of
an uptrend.
Description:• Price forms three swing highs at
approximately the same price
level.
Confirmation:• The pattern is confirmed on a
break of the lowest of the
intermediate swing lows
Projected Target:• The distance from the swing
highs to the point of breakout is
projected down from the point
of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
22
Triple Top
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© Copyright 2013. Lance Beggs. All Rights Reserved.
23
Triple Top
Uptrend
SW - H SW - H
Lowest
Intermediate
SW - L
Breakout
Target
Projection
Target
Achieved
SW - H
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Triple Bottom
25
Pattern Type:• A reversal pattern at the bottom
of a downtrend.
Description:• Price forms three swing lows at
approximately the same price
level.
Confirmation:• The pattern is confirmed on a
break of the highest of the
intermediate swing highs.
Projected Target:• The distance from the swing
lows to the point of breakout is
projected up from the point of
breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
26
Triple Bottom
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© Copyright 2013. Lance Beggs. All Rights Reserved.
27
Triple Bottom
Downtrend
SW - L
SW - L
Highest
Intermediate
SW - H
Breakout
Target
ProjectionTarget
Achieved
SW - L
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Head and Shoulders
29
Pattern Type:• A reversal pattern at the top of an
uptrend.
Description:• Price forms a swing high, a higher
swing high, and a lower swing high.
Confirmation:• The pattern is confirmed on a break
of the neckline – the line joining the
intermediate swing lows.
Projected Target:• The distance from the highest swing
high to the neckline is projected
down from the point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
30
Head and Shoulders
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© Copyright 2013. Lance Beggs. All Rights Reserved.
31
Head and Shoulders
Uptrend
ShoulderHead
Neckline
Breakout
Target
Projection
Target
Achieved
Shoulder
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Inverted Head and Shoulders
33
Pattern Type:• A reversal pattern at the bottom of a
downtrend.
Description:• Price forms a swing low, a lower
swing low, and a higher swing low.
Confirmation:• The pattern is confirmed on a break
of the neckline – the line joining the
intermediate swing highs.
Projected Target:• The distance from the lowest swing
low to the neckline is projected up
from the point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
34
Inverted Head and Shoulders
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© Copyright 2013. Lance Beggs. All Rights Reserved.
35
Inverted Head and Shoulders
Downtrend
Shoulder
Head
Neckline
Breakout
Target
Projection
Target
Achieved
Shoulder
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Symmetrical Triangle
37
Pattern Type:• A continuation pattern.
Description:• Price contracts with lower swing
highs (falling trendline) and higher
swing lows (rising trendline)
towards a single point.
Confirmation:• The pattern is confirmed on a break
of the triangle, usually occurring in
the final third of the pattern.
Projected Target:• The height of the triangle is
projected in the continuation
direction from the point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
38
Symmetrical Triangle
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© Copyright 2013. Lance Beggs. All Rights Reserved.
39
Symmetrical Triangle
Uptrend
Falling Trendline
Rising Trendline
Breakout
Target
Projection
Target
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Ascending Triangle
41
Pattern Type:• A continuation pattern.
Description:• Price contracts with level swing highs
(short-term resistance) and higher
swing lows (rising trendline) towards a
single point.
Confirmation:• The pattern is confirmed on a break of
short-term resistance, usually occurring
in the final third of the pattern.
Projected Target:• The height of the triangle is projected
upwards from the point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
42
Ascending Triangle
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43
Ascending Triangle
Uptrend
Short-term Resistance
Rising Trendline
Breakout
Target
ProjectionTarget
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Descending Triangle
45
Pattern Type:• A continuation pattern.
Description:• Price contracts with lower swing highs
(falling trendline) and level swing lows
(short-term support) towards a single
point.
Confirmation:• The pattern is confirmed on a break of
short-term support, usually occurring in
the final third of the pattern.
Projected Target:• The height of the triangle is projected
down from the point of breakout.
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© Copyright 2013. Lance Beggs. All Rights Reserved.
46
Descending Triangle
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47
Descending Triangle
Downtrend
Short-term Support
Falling Trendline
Breakout
Target
Projection
Target
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Rectangle
49
Pattern Type:• A continuation pattern.
Description:• Price forms a short-term range with
level swing highs forming short-
term resistance and level swing
lows forming short-term support.
Confirmation:• The pattern is confirmed on a break
of the pattern in the continuation
direction.
Projected Target:• The height of the rectangle is
projected in the continuation
direction from the point of breakout.
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50
Rectangle
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51
Rectangle
Uptrend Short-term Support
Short-term Resistance
Breakout
Target
Projection
Target
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Flag
53
Pattern Type:• A continuation pattern.
Description:• Price forms a short-term consolidation,
tilted against the direction of the
market trend, between approximately
parallel sloping support & resistance.
Confirmation:• The pattern is confirmed on a break of
the pattern in the continuation
direction.
Projected Target:• The length of the swing preceding the
flag is projected forward in anticipation
of an equal swing following the flag.
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54
Flag
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55
Flag
Downtrend
Rising Support
Rising Resistance
Breakout
Target
Projection
Target
Achieved
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Pennant
57
Pattern Type:• A continuation pattern.
Description:• Price forms a short-term symmetrical
triangle pattern (smaller scale than the
usual symmetrical triangle).
Confirmation:• The pattern is confirmed on a break of
the pennant in the continuation
direction.
Projected Target:• The height of the price swing leading
into the pattern is projected in the
continuation direction from the point of
breakout.
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58
Pennant
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59
Pennant
Downtrend
Rising Support
Falling Resistance
Breakout
Target
Projection Target –
Not Yet Achieved
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Rising Wedge
61
Pattern Type:• A continuation or reversal
pattern.
Description:• Price forms higher swing highs
and higher swing lows which
both converge towards one
point.
Confirmation:• The pattern is confirmed on a
break of the lower trendline of
the pattern.
Projected Target:• The height at the widest point of
the rising wedge is projected
down from the point of breakout.
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62
Rising Wedge
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63
Rising Wedge
Downtrend
Rising Support
Rising ResistanceBreakout
Target
Projection
Target
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Falling Wedge
65
Pattern Type:• A continuation or reversal pattern.
Description:• Price forms lower swing highs and
lower swing lows which both
converge towards one point.
Confirmation:• The pattern is confirmed on a
break of the upper trendline of the
pattern.
Projected Target:• The height at the widest point of
the falling wedge is projected up
from the point of breakout.
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66
Falling Wedge
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67
Falling Wedge
Downtrend
Falling
Support
Falling
Resistance
Breakout
Target
ProjectionTarget
Achieved
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© Copyright 2013. Lance Beggs. All Rights Reserved.
• Historical Analysis
– Individual Pattern Recognition• Multiple markets, single pattern
– Patterns within the trend and S/R structure• Single market, multiple patterns
• Forward Analysis
– Recognition of patterns at the hard right edge• Compare hindsight with actual decisions
68
Homework
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• Pattern Failure
– An advanced TA topic
– But take note of it now as much can be learnt
from pattern failures
69
Homework
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• Chart Patterns are visual patterns within the price movement
which are used in the following manner:
– Analysis
• Chart patterns provide structure to the price movement and allow us
to project forward in time to identify future price targets.
– Trading
• Chart patterns also identify trade opportunity, allowing us to enter on
a breakout of the pattern, targeting the analysis price projection.
70
Summary
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• Four Stages to a Pattern
1. Trend
2. Pattern
3. Breakout
4. Trend
• Two Types of Patterns
1. Reversal
2. Continuation
71
Summary
• Patterns:
– Double Top
– Double Bottom
– Triple Top
– Triple Bottom
– Head and Shoulders
– Inverted Head and Shoulders
– Symmetrical Triangle
– Ascending Triangle
– Descending Triangle
– Rectangle
– Flag
– Pennant
– Rising Wedge
– Falling Wedge
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© Copyright 2013. Lance Beggs. All Rights Reserved.
Coming up next…
Module 4: Chart Analysis
Part G: Charting Patterns (Micro)
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Contact Details
• Lance Beggs
• Email: [email protected]
Thank You!
74
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