back start next
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [ 33 ] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81]
33 Chapter 10: Pattern Recognition 90 80 700 500 300  100llllllll.llllllll,llllllllllll,l....ll.lll..Mllllllllll......ll I , I I I 111 I I I I I Hll 3/00 4/00 5/00 6/00 Figure 10.4 W bottom, Bollinger Bands, and volume confirmation, Art Technology Group, 100 days. Strong volume on the first low, weak volume on the second low, and strong volume on the liftoff. two. Such a top will likely be a variation on the head-and-shoulders pattern. Bollinger Bands can dramatically clarify the patterns you see on the charts. An ideal W is a momentum low that occurs outside the lower Bollinger Band, followed by a price low inside the lower band. Even if the final price low has driven to a new absolute low, it is not a new low on a relative basis. Therefore the ensuing rally can be acted upon without the emotion usually coincident with a new low in price. To help categorize these patterns, you should think of momentum highs and lows followed by price highs and lows. Typically in a decline youll get an accelerated move into the first low; this is where the momentum is the highest, a fact that is usually confirmed by very high volume. Then will come a period of recovery followed by a decline that will establish the price low, which may well be a new low in price but which will occur with greatly reduced momentum and volume. In many cases the
Part III: Bollinger Bands on Their Own momentum peaks and troughs will occur outside the Bollinger Bands and the subsequent price peaks and troughs will occur inside the Bollinger Bands. Another way of thinking about tops and bottoms is as processes that consume momentum. So in addition to the volume indicators that we favor in this book, momentum indicators can be very useful in the diagnostic process. A useful analytical approach is to plot both a volume indicator and a momentum indicator (Figure 10.5). Each operates independently of the other, so when they signal together, they afford a high level of confidence in the outlook for the stock. Although one of the most important uses of Bollinger Bands is in diagnosing tops and bottoms, there are other important pattern-recognition uses: identifying continuing trends, defining trading ranges, and recognizing The Squeeze. Pattern recognition is the key to successful technical investing. And Bollinger Bands, especially when coupled with indicators, are the key to successful pattern recognition. The next chapter | | | | | | | 1 1 m | . \ | | | | | [ l\ fli j.i 1 | | | | | - - | | | | | | • - y~ 1 1 | | 1 1 | | | | | | | | ~. -- 1 1 | | 1 1 | | | | | -iIIiihIiIhLinIhI | hi n.i Ii | lull 1 | | ,,, ,,h. 1, ,11.1 | LmL.IimL III |
90 80 70 50 30 700 500 300 Figure 10.5 W bottom, Bollinger Bands, volume indicator, and momentum indicator, Art Technology Group, 100 days. Less downside momentum and less volume on the retest.
Chapter 10: Pattern Recognition presents a method of categorizing patterns that will stand you in good stead in all market conditions. KEY POINTS TO REMEMBER Ms and Ws are the most common patterns. Patterns are often fractal. Bollinger Bands can be used to clarify patterns. Lows (highs) outside the bands followed by lows (highs) inside the bands are typically reversal patterns even if a new absolute low or high is made. Volume and momentum indicators are very useful for diagnosing tops and bottoms.
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [ 33 ] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81]
|
Menu
