I often wonder whether it makes sense to be very formalistic about chart structures. The patterns were not ‘invented’, they were ‘discovered’. They reflect the way human beings (in conglomerate) feel and think – and, most importantly, act – while trading or investing. I can’t see how it makes sense to expect the ‘drawings’ to be perfect.
Patterns seem to be interrelated. A flat – in a way – is a zigzag with less oomph.
A triangle is a range which is being “played” – buyers or sellers come in before the latest bottom or top are reached again. A triangle is indecisive. While it tends to be a continuation pattern, its very indecisiveness implies that the move is weakening.
A wedge (ED) is an impulse with overlaps. In a wedge there is a lot of energy, but with inherent accumulating uncertainty. It often ends up creating an overshoot, which is basically a pseudo breakout, a final episode of panic buying (or selling), with people getting trapped on the wrong side.
I could go on… Some of what I said here is just classic stuff, other things are a bit idiosyncratic, but the idea is simple – IMO, if one “gets” what’s on Mr. Market’s mind, that’s the key. Geometric perfection is nice, it allows for prettier pictures – and yes, maybe even increases somewhat the odds – but is still secondary. |
