Saturday, April 5, 2008

The main shapes of the technical analysis

The double-summit:


The "double-summit “ is a reversal shape: The double-summit materializes after a stage bull when a stock fails twice to cross an increase point (stock's value).
In general, the volumes of transaction during second summit are weaker than during the first. If the lowest recorded between both summits is crossed in fall, the shape is validated. (It means that the trader can invest on this stock.)

The double-hollow:


The "double-hollow" is another reversal shape: The double-hollow materializes after a bearish stage when a stock rebounds twice on the same point. In general, the volumes of transaction during the second hollow are weaker than during the first. If the highest recorded between both summits is crossed in increase, the shape is validated.


Head-shoulders:

The face in “head-shoulders” is a major reversal shape. After a long bull tendency, it decomposes into several stages. First of all, market price attains a higher one which is the left shoulder. A profit-taking follows towards a low point (the support). A strong rebound drives the value on a new summit more high (superior to the previous one), it is the head. The stock falls then to its previous low point (the support). The right shoulder is materialized by the last rebound. When it attains its second shoulder, the stock begins its fall. When the low point is broken, it validates the shape of reversal. (the support is called " line of neck ")


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