Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: TraderAlan who wrote (2018)	7/25/1999 11:40:00 AM
From: TraderAlan	Read Replies (2) \| Respond to of 18137

The Traders Wheel 7/26/99 by Alan Farley editor/publisher The Hard Right Edge hardrightedge.com Pattern Failure Patterns appear at the end of thrusting price movements. They are characterized by constricted swings between key support and resistance levels. Pattern development completes when a new trend leg breaks through this wall into directional price change. This new thrust may be in the same or opposite direction as the previous one. A pattern between adjacent price moves in a single direction *continues* that trend. Alternatively, when a breakout turns and retraces the last trend leg, the intervening pattern *reverses* the prior move. You can categorize most patterns by their tendency toward continuation or reversal. This familiar bias underlies the predictive power of these structures. By their repeating nature, a well-marked chart landscape can be drawn to profit from the expected breakout. Use classic observation and well-chosen technical indicators to examine patterns as they develop. Their bullish or bearish nature can often be identified well before completion and exact entry points chosen where new price momentum will likely erupt. But sometimes patterns won't do what the crowd expects. One of the most powerful signals in pattern analysis flashes when a setup fails to act according to its tendency. This *pattern failure* often triggers sharp price movement in the opposite direction from the formation's natural bias. Have a contrarian entry system based on this reversal waiting in your trader's toolbox. But first exercise sound risk management as you recognize this event in progress and wait for ripe opportunity to appear. Probability underlies all prediction. Through skilled observation or system-driven signals, technicians anticipate future price movement and enter trades they hope will profit from it. But the most common price patterns often fail to act as expected. Look to the edges of these rogue formations to identify trigger points where price signals a break in the low-odds, high-profit direction. One obvious example can be seen in the unexpected Tellabs rally after it drew a recognized reversal formation. The classic *Head and Shoulders* reversal has been subject to intensive study over the last century. In fact, one popular investigation discovered this well-known pattern works only 79% of the time. While this figure lies well outside random outcome, it illustrates just how wrong you might be the next time you sell short at the H &S neckline. Caption: TELLABS RALLY hardrightedge.com Sell short at the Head and Shoulders neckline? That classic TA advice got traders into major trouble earlier this year on TLAB. When price rose beyond the level of the right shoulder, the pattern failed and smart traders prepared for low-risk long entry. The break at the tops of the head and right shoulder signaled confirmation AND also offered an easy pullback trade.