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If "Classic Patterns" is selected then the Pattern Duration criteria is enabled. This allows the investor to restrict the search to patterns that formed over a minimum or maximum number of days. Technical Analysis publications often anticipate that if a stock exhibits the price movement suggested by a classic pattern, this will occur within a time period equivalent to the duration of the pattern. If the anticipated price movement does not occur within that time period, then the pattern may have broken down and the suggested price movement may not occur after all. This means that longer patterns anticipate possible price movement over a longer term, and shorter patterns anticipate possible price movement over a shorter term. The investor might set this criteria based on the desired trading horizon.
Inbound Trend Duration
This criteria is enabled if "Classic Patterns" or "Short-term Patterns" is selected. The trend leading into the pattern is often referred to as the "inbound trend". Many patterns indicate a reversal or continuation of this prior trend. Therefore it is useful for the investor to ensure that the prior trend was well-established.
Some technical analysts prefer an inbound trend that is at least as long as the pattern itself. In this case, if an investor is specifying a pattern duration of at least 30 days, then the investor might also want to specify an inbound trend duration of at least 30 days. The investor should note that it is not always necessary to have an inbound trend that is at least as long the pattern. In many cases, an inbound trend can be considered well-established if it is a shorter but strong rally or decline.
Possible Percentage Price Move
This criteria is enabled if "Classic Patterns" is selected. Technical Analysis publications often indicate that classic patterns anticipate price movement that is equivalent to the "height" of the pattern. The "move" refers to the amount the price will move away from the breakout price defined by the pattern.
Based on this concept, patterns can be selected based on the possible price move that they suggest, as a percentage of the breakout price defined by the pattern. The investor should note that the Possible Percentage Price Move is based on the breakout price defined by the pattern, not on the current price of the stock.
The investor should also note that the Possible Percentage Price Move is not a guaranteed prediction. Technical Events™ and the possible price movement that they suggest should be used as additional information in a more comprehensive research process about the instrument.
Every chart pattern has a percentage of likelihood that it will occur. Click here to view the probabilities for some well known patterns.
Technical Events™ have been divided into four categories: Classic Patterns, Short-term Patterns, Indicators and Oscillators.
Classic Patterns is a term used to refer to a group of patterns that typically have a longer-term horizon (greater than 12 days) and which have distinct price swings such that the price swings form distinctive patterns. The names of classic patterns often reflect the shape of the formation such as the Double Top, Double Bottom, Head and Shoulders Top, Ascending Triangle and so on. Each of these patterns is described in more detail in the Lesson
Short-term Patterns are based on the shape and relationship of the candlestick(s) or price bar(s) representing one or multiple consecutive trading days. This includes patterns such as the Hanging Man and the Gap Up. The event is the confirmation that the pattern has formed in the price bar(s). These events are useful for suggesting possible short-term price movement. They are also useful for supporting or refuting the possible price movement suggested by classic patterns. Short-term patterns are often considered as supplementary information. Each of these event types is described in more detail in the Lesson
Indicators are based on moving average calculations. Each of these event types is described in more detail in the Lesson
Oscillators are based on mathematical formulas that incorporate historical or recent prices of the stock. Each of these event types is described in more detail in the Lesson
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