arab academy for science and technology & maritime transport investment and finance institute

Arab Academy for Arab Academy for Science and Science and

Technology & Technology & Maritime TransportMaritime Transport

Investment and finance Investment and finance InstituteInstitute

Technical Analysis

Lecturer: Mr. - Ahmed el oteify

Reversal and Continuation

PatternsAhmed Oteify

Reversal Patterns

A reversal pattern reverses the trend direction from anuptrend to a downtrend and vice versa

When an uptrend reverses to a downtrend, buyers aregetting weaker, and sellers are getting stronger

When an downtrend reverses to an uptrend, sellers aregetting weaker, and buyers are getting stronger

During a reversal formation, there is a shift in the power between buyers and sellers (demand and supply). This shift in strength is the reason for the trend reversal

Reversal Patterns

*Head and Shoulders

Reverses the trend from the upside to the downside

*Inverted Head and Shoulders

Reverses the trend from the downside to the upside

*Double Tops and Triple Tops

Reverses the trend from the upside to the downside

*Double and Triple Bottoms

Reverses the trend from the downside to the upside

Wedges

Head-and-ShouldersHead-and-Shoulders

The Head-and-Shoulders price pattern is the most reliable The Head-and-Shoulders price pattern is the most reliable and well-known chart pattern. It gets its name from the and well-known chart pattern. It gets its name from the

resemblance of a head with two shoulders on either side. The resemblance of a head with two shoulders on either side. The reason this reversal pattern is so common is due to the reason this reversal pattern is so common is due to the

manner in which trends typically reversemanner in which trends typically reverse..

A up-trend is formed as prices make higher-highs and higherA up-trend is formed as prices make higher-highs and higher lows in a stair-step fashion. The trend is broken when this lows in a stair-step fashion. The trend is broken when this

upward climb ends. As you can see in the following upward climb ends. As you can see in the following illustration, the "left shoulder" and the "head" are the last illustration, the "left shoulder" and the "head" are the last

two higher-highstwo higher-highs

The right shoulder is created as the bulls try to push prices higher, but are The right shoulder is created as the bulls try to push prices higher, but are unable to do so. This signifies the end of the up-trend. Confirmation of a unable to do so. This signifies the end of the up-trend. Confirmation of a

new down-trend occurs when the "neckline" is penetratednew down-trend occurs when the "neckline" is penetrated During a healthy up-trend, volume should increase during each rally. A sign During a healthy up-trend, volume should increase during each rally. A sign

that the trend is weakening occurs when the volume accompanying rallies that the trend is weakening occurs when the volume accompanying rallies is less than the volume accompanying the preceding rally. In a typical is less than the volume accompanying the preceding rally. In a typical

Head-and-Shoulders pattern, volume decreases on the head and is Head-and-Shoulders pattern, volume decreases on the head and is especially light on the right shoulderespecially light on the right shoulder

Following the penetration of the neckline, it is very common for Following the penetration of the neckline, it is very common for prices to return to the neckline in a last effort to continue the up-prices to return to the neckline in a last effort to continue the up-trend (as shown in the preceding chart). If prices are then unable trend (as shown in the preceding chart). If prices are then unable

to rise above the neckline, they usually decline rapidly on to rise above the neckline, they usually decline rapidly on increased volumeincreased volume..

An inverse (or upside-down) Head-and-Shoulders pattern often An inverse (or upside-down) Head-and-Shoulders pattern often coincides with market bottoms. As with a normal Head-and-coincides with market bottoms. As with a normal Head-and-

Shoulders pattern, volume usually decreases as the pattern is Shoulders pattern, volume usually decreases as the pattern is formed and then increases as prices rise above the necklineformed and then increases as prices rise above the neckline..

Price Target after the break of the neckline

Target

Head & Shoulders

Selling after confirmation

Selling before confirmation

Inverse Head & Shoulders

Target

Double Top

Double Bottom

Target

WedgesWedges

Falling WedgeFalling Wedge

Rising WedgeRising Wedge

Continuation Patterns

A continuation pattern appears during the trend and it acts as a continuation.

A continuation pattern shows balance between buyers and sellers. It is a sideways movement that shows that buyers and sellers are having the same strength

When continuation pattern appears after an uptrend, the trend is expected to continue to the upside, and vice versa.

Continuation patterns can act as reversal sometimes.

AHMED EL OEIFYAHMED EL OEIFY

Continuation Patterns

*Triangles

Symmetrical ------ BalanceAscending ------- BullishDescending ------ Bearish

*Rectangles

Balance between buyers and sellers

*Flags and Pennants

Continuation formations, can be bullishor bearish

Cub & Handle

Bullish

Symmetrical Triangle

Ascending Triangle

Descending Triangle

Flags and Pennants

Cub & HandleCub & Handle ContinuationContinuation

referencesreferences

technical analysis the complete technical analysis the complete resource for financial marketresource for financial market

((KirkpatrickKirkpatrick )) technical analysis explainedtechnical analysis explained

((martin g pringmartin g pring ))Technical analysis of the financial Technical analysis of the financial

marketsmarketsJohn MurphyJohn Murphy(())

GOOD LUCK

Ahmed Oteify

Ot_stock@yahoo.com