Today, we are going to cover four of the most popular patterns that I like to follow. There are a large number of patterns out there and it is something that you going to want to become familiar with if you want to be successful in the stock market. The reason that patterns are important is because they tend to repeat themselves. Therefor; if you are able to see these patterns forming and you understand what they mean, you will be able to pick great stocks. Another example of patterns that many people might know is the boom and bust cycle of the real estate market where it ascends, hits its peak, and then trends down, eventually forming a cup and trending upward again.
1. The ascending up trend
The ascending up trend is when a stock continues to show signs of growth, but as it's growing it hits peaks and has sell offs. It always bounces at a known, ascending, support level. The whole point of buying a stock is to make sure that you're getting it for a good deal. It's very difficult to find the exact bottom price that a stock is going to go to, but you can get close. One of the things that I focus on when I am trading stocks is the EMA indicator. Generally, when the candles are above the EMA line, the stock is showing signs of an up trend. The reverse is true as well. When a stock is trending down, I wait until the stock breaks the 180 day EMA and I get a conformation of an up trend.
2. Horizontal Pattern
In this pattern, the stock trends horizontally. With this trend, it's very easy to identify the low points and the high points. The lower read line is a known bounce area and the upper one is an area where the stock usually faces resistance.
3. Dip Buying
This stock had a large dip after its earning report. What you need to make sure of when buying stock dips is that you first see consolidation and then an upward trend which holds above the EMA. I don't like to hold stocks during their earnings. I wait for the sell off and then by the dip if I see value in the stock.
4. Old Resistance, New support
In this pattern, you look at the old resistance levels that the stock had. These previous resistance levels then become the support for the stock when it pulls back. When this happens, you have to make sure that the stock consolidates and shows signs of an upward trend before jumping in, just in case the stock is going to break that support and continue trending downward.
Learn Plan Profit Course: https://learnplanprofit.net/lesson-library
Free Stock Market Facebook Group: https://www.facebook.com/groups/206449886400926/