CRYPTO TRADING

Crypto Signals Crypto Trading

About
We are group of crypto lovers. We are in trading for few years. Our goal is to help
everyone to first learn and then to earn. You have to understand that in trading it is impossible
to learn everything. Trading is combination of TA (Technical Analysis) and FA (Fundamental
Analysis. You must know that in trading nothing is 100% guaranteed. We are here to help
you to learn as much as possible to minimize risk.

This e-book is just part of my big book that will be published probably in 1 st quarter
of 2018. This e-book will contain tips and strategies how to be good technical analyzer. Our
main book that will be published in 2018 will contain everything you need for trading.

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Crypto Signals Crypto Trading

Support
Support is basic and you have to learn how to try to predict potential support and to
find support area. Everything later will be based on support but combined with other things.
So without support, it will be very hard to be good technical analyzer. So you have to go
through this part few times to make sure it is 100% clear. You must understand this!

Support is not fixed price. It is area between 2 prices. For example, you can’t say that
support is on $100. It could be but only in theory. It is better to say that support is in area
from $98 up to $102 and it will include $100 too.

But what is support? Support is the price level at which demand is thought to be strong
enough to prevent the price from declining further. The logic dictates that as the price declines
towards support and gets cheaper, buyers become more inclined to buy and sellers become
less inclined to sell. By the time the price reaches the support level, it is believed that demand
will overcome supply and prevent the price from falling below support.

More time support is tested, it is more valid. To be valid support, it has to be tested at
least 2 times. If support is test 5+ times it is very strong support but you have to know that
there is not unbreakable support.

Check below LTC/BTC chart and support area around 0.0100 BTC

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As you can see, this support held out 3 times. It is very easy to draw support. Just use
2 lowest points and match them. 3rd one is required to confirm validity of support. This one
has been successfully tested 3rd time and after that it made nice gain of 50% +. So if you
bought LTC at 3rd support, and hold enough, you would make 50-60% profit.

If price goes below support but close above support, it means that support is still not
broken. Candle should be closed below support to be able to say that support is broken.

Check below example

If you do not know what means closed, please check photo below

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• Lowest price – It was lowest price that is reached in this time period
• Opened price – It was first price in this time period
• Closed price – It was last price in this time period
• Highest price – It was highest price that is reached in this time period

You must know that support is not unbreakable. It can be successfully tested 100 times but
101st time it can breakdown. It is not that easy to predict will support hold out or not. That is
reason why it is recommended to put stop loss to prevent bigger loss. It is better to book 10%
loss than 50%.

Check below example for LTC/BTC

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It was looking that support will hold out this time too and potential uptrend has been
started but then breakdown. Then you can see 4. It tried to cross green area ( now green area
is resistance ( more about that later )). What is reason for breakdown? This is proof that
technical analysis is not enough. You need to follow news. Maybe in this period LTC had
negative news which caused breakdown.

Check below example for LTC/BTC, maybe we could predict breakdown without
following news?

So, crypto experts or even good traders who follow volume could be able to see that
something is not good. Usually, volume must be higher for uptrend and in first two we have
high volume but in third one there is not high volume and it is one of the reason why support
is broken. Also, volume sticks should be green. Because when you have high volume but red
sticks it will cause breakdown again. So only green volume sticks are good for potential
uptrend.

To conclude, support is basic and without supports you are not able to predict future
movement. Also, support is not enough. It could be enough but it is recommended to use

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supports with other tools and then validity is higher. When few tools are showing support,
possibility to be broken is much lower. If you do not understand this lesson, please read it
few times because without supports it is almost impossible to be good technical analyzer.

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Resistance
If you learned how to use and how to draw support areas, it is time to learn more about
resistance and how to use it and draw it. Support and resistance are basics. One more time,
without them, it would be very hard to do any analyze. If you do not understand this lesson,
make sure to read it few time. You must understand this!

First of all, same as support, resistance is not fixed price. It is area from one price to
another. For example, you can say that resistance is at $100 but it is more in theory. In
practice, it is very hard to happen. It would be ideal resistance. It is better to say that resistance
area is from $98 up to $102.

How to draw resistance area? It is very easy, just find at least 2 peaks and match them.
It is enough to match 2 peaks but 3rd one will confirm validity of resistance area. So with 2
peaks it is just potential resistance area. When 3rd one confirm it, then it is resistance area. If
resistance area has more than 3 peaks, it just mean that area is stronger and it is harder to
break it.

Same as support, it is not unbreakable. Even if it is tested 100 times and it is not
broken, 101st time it can be broken. In crypto world nothing it 100% guarantee and it is
something that you have to learn and to keep that in mind whenever you think that something
will 100% happen. It is likely to happen but never say it is 100% guaranteed.

Check below LTC/BTC chart and resistance are around 0.0101BTC.

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I am using again LTC/BTC because I want to prove that using only one pair (in this
situation LTC/BTC) is enough to explain everything. In this case, we can see that this
resistance is test 3 times and still unbroken. So this resistance is enough strong to hold price
below. After 1st and 2nd peak we were able to draw potential resistance but after 3 rd one
resistance is confirmed and now it is strong resistance but strong doesn’t mean unbreakable!

Also, if price cross resistance but close below resistance then resistance is still valid
and it is not broken.

Check below LTC/BTC as an example.

As you can see, it has crossed resistance but it didn’t have enough power to continue
and it closed below resistant, this time it is closed at resistance but resistance still valid. One
more time, same as support, resistance is not unbreakable.

Check below LTC/BTC as an example.

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This is same resistance as before but just this time it looks different because it is
different size ration between the sticks. It looks like 4 will become new part of resistance but
then day or two later, resistance was broken.

It is hard to predict when resistance will get broken. In this case, main reason was
news for LTC and it caused big spike and gain from 0.005BTC up to 0.018BTC. But maybe
it was possible to predict this breakout only using chart analysis without knowing news?

Check below LTC/BTC as an example.

As you can see, in first three examples, volume is very low but in 4th it is huge. One
more time, volume could be used to predict potential breakout. So it is recommended to use
resistance and support together with volume and it has more validity than only using support

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or resistance without volume. As I said before, support and resistance are good to predict
something but it is better to use with some other analyzing tools.

Support and resistance

If you read carefully above 2 lessons, you could notice that support was at 0.0100BTC
and resistance at 0.0101BTC. So it is almost same area. Once support is broken, it will become
resistance. Same thing when resistance is broken it will become support.

Check below LTC/BTC as an example.

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Let’s explain what all these numbers mean:

1) This was resistance for LTC.

2) Then resistance was broken and turned into support.
3) It tried to breakdown but support was strong enough
4) It tried again to breakdown but support was strong enough.
5) One more unsuccessful breakdown.
6) It tried 5th time to breakdown but support was strong for few days and then it was
broken
7) Support was broken and it turned into resistance.
8) Unsuccessful breakout.
9) One more time it tried to breakout but resistance was strong enough to hold price
below.

As you can see support and resistance could be same area and it can be useful to
predict potential buy area or sell area. For example, you could predict that 2 will be good buy
area. If your prediction was good you would be able to make profit from 50% up to 70%.
Also, you could predict that 8 and 9 will be good sell area because it is going to touch
resistance and there it not high volume so probably it will come down again. One more time,
support and resistance are basics and you can’t do anything without them but it is not enough
to analyze chart. I could be but it is better to use at least one more thing. Sometimes I am
analyzing charts only by using let’s say support areas to predict potential buy area but I want
to confirm that with Fibonacci retracements (later will be lesson for this too).If they are
showing same areas, it has much more chance to be true than to use only support.

Same thing with resistance, I like to use this tool to predict potential sell area but
combined with Fibonacci retracements it gives validity of prediction is much higher. So, I am
suggesting you to use Fibonacci and resistance together to try to predict best sell area.

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Trend lines
I hope you understand our lessons about support and resistance because you have to
understand that before this lesson. Trend lines are very important tools and it is very important
to understand them and learn how to use them. We are using trend lines to identify potential
uptrend or downtrend.

How to draw trend lines? It is very simply, you just have to connect at least 2 price
points to identify trend, whether it is uptrend or downtrend.

We have two types of trends: uptrend and downtrend. We will first explain how to
draw trend lines for uptrend. To draw these lines, you have to connect at least two lowest
point. Two lowest points could be enough but for confirmation we need 3 points. This trend
line is support for this uptrend. If this support get tested more times (4th, 5th, 6th…) it will
become even stronger. But you must know that it is not unbreakable.

Check below LTC/BTC as an example.

1st and 2nd points are enough for potential trend to get established but 3rd one is
required to confirm validity of uptrend and this trend line (support).

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Check below LTC/BTC as an example

You can see that we used 1st and 2nd point to establish potential uptrend line but then
3rd point closed under trend line (support). This is reason why I told in lesson for support that
it is not fixed price (line) but it is area where is support established. If this coin continued to
drop, then support area or uptrend would be broken. So, in this case you have to wait few
more candles to see confirmation. But as you can see next candlestick was green and it was
easy to predict that support will hold out and it is time for buying. As you can see in 5 th
situation 7 candlesticks in a row were red and it was confirmation of breakdown. So I hope
you see difference here. It is very important and this is one of reason why to use stop loss 5%-
7% under potential support because if you put 2% below it could happen that your order will
be executed and you will sell your coins but support will hold out and you will miss big profit.
So, more about stop loss will be later in this e-book or in next e-book where I will write more
about strategies and tips in crypto trading. This photo is showing that trend is not unbreakable.
I just want to help you understand that uptrend is easier to break than support. It is logical
because price can’t go up forever and uptrend should be broken sooner or later but in theory
support can hold forever if it is established too low but uptrend should be broken sooner or
later. So I hope you understand this because when you see that coin is going to test uptrend it
is more dangerous and it could breakdown easier than if coin is going to test support. When
coin is going to test support it is easier to hold out than if it is going to test uptrend. This is
very important because when uptrend is broken, we can expect big correction (from 20% up
to even 90%) but when is broken support that is established low, then possible correction is
not so big (usually from 10% up to 30%). It is not smart to establish support to high because
it is very hard to hold out more than 3 max 4 times. Support that is established at low price,
it can be tested few times so it is smarter to base your trading on support that is established
lower if you like low risk trading.

How to draw trend lines for downtrend? It is very easy, just find at least 2 highest
points and connect them with trend line. You can use 2 peaks to establish trend line but you
will have 3rd one to confirm downtrend. So, with 2 highest points you can establish trend line

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but you need 3rd one to confirm validity. This trend line is actually resistance. It is trying to
prevent coin from potential uptrend. If line was tested more than 3 times, let’s say 4 or 5, it
is even stronger.

Check below ETH/BTC as an example. (I told everything will be for LTC/BTC but I
found better chart to explain this lesson, I could use LTC/BTC but I decided to choose ETH
because it is easier for you to understand).

As you can see, this resistance is test 6 times and it still strong enough to prevent ETH
from uptrend. But, sooner or later this will be broken. When I told that uptrend line should be
broken sooner or later, it is true but in theory it can go up forever without breakout but this
one can’t. Why? Because every day it is going deeper and deeper and resistance is becoming
lower and lower and one day it will break out for sure or ETH will disappear. Because it is
tends to zero and it is impossible even in theory to come to zero because this line will go the
more down because time won’t stop, it would mean that this line would continue into negative
but we all know that price can’t be negative. Check out below an example.

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This is what I am trying to example you, it can go down but it will break out sooner
or later and this is maybe only thing that is 100% guaranteed in crypto because as we all know
price can’t be negative. So I hope you understand this because this is very important and in
this example if line is test few times, every next time has more chance breakout because price
is lower and there are more buyers because they think price is good for entry. Same thing
with previous lesson about uptrend lines. Every new test has more chance to break down
because there are more sellers that want to sell coins and book profit.

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As you can see, if price cross trend line but close below, it mean that line is still valid
and strong enough to hold out. Same thing with uptrend lines if price drop below but it close
above it means that line is still strong enough to hold price above line.

Important thing that’s worth for all these tools (support, resistance and trend lines) is
that try to draw as I did on these photos above. Spacing between lowest or highest points
shouldn’t be too small and too big. So try to make some average as I did on these photos
above.

Check below examples for bad chart analysis.

As I said spacing should be bigger that this because this is too small and validity of
this analyze is almost zero. It is better to use too big spacing between two points that to use
too small.

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Double Top Reversal

The Double Top Reversal is a bearish reversal pattern. It is made up of two
consecutive peaks that are roughly equal, with a moderate through in-between.

To create Double Top Reversal pattern, we need prior uptrend. So coin should go up
and then reach certain price and stop with uptrend. Then coin should make downtrend (mostly

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it is 15-20% from peak). Then coin should go up again and once it reach previous high it will
stop and there will be established resistance. After that coin will go down first to test support
and after breaking out the support, it will continue with downtrend. So, maybe this looks
difficult to understand but it is actually very simple.

Check below LTC/BTC as an example.

As you can see, it is not that easy to find this pattern. You must be very good in trading
to spot this pattern. Let’s explain this chart:

1) This is prior uptrend that is first part for this pattern.

2) This is first peak
3) This is downtrend of 15-20% after first peak.
4) This is new uptrend.
5) This is new peak after uptrend. After this peak, resistance was established.
6) This is moment when support was broken.

Now when is good to reenter? Just simple do some mathematics and you will get entry
point. This is formula: First resistance – support = result, then support – result = buy entry.

So in this example, resistance was established around 0.021, support around 0.0183,
so 0.021-0.0183 is 0.0027 and then 0.0183-0.0027 = 0.0156. Let’s say what would happen if
you followed this strategy? Check below an example.

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So if you followed this formula, you would have perfect buy entry and you would
have 7 days to book profit. This time LTC continued to go further down but even in this
situation you would be able to make nice profit. So I would suggest to follow this formula
when you find this pattern

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Double Bottom Reversal

The Double Bottom Reversal is a bullish reversal pattern. The pattern is made up of
two consecutive troughs that are roughly equal. This is very similar to previous lesson but it
is important to see where differences are.

Before this patter, coin should go through correction phase (downtrend). Sooner or
later downtrend will stop and coin will start with small uptrend from the lowest point. Coin
will go up 15-20%. Uptrend will stop and new downtrend will start again. It will go 15-20%
back down to reach previous lowest point. Once coin reach lowest point, support will be
established and coin will start with new uptrend. Coin will go again 15-20% up to test
resistance and if coin breaks out, we have this patter and we can expect to go up at least 15-
20% more.

Check below BTC/USDT as an example.

As you can see, 1st is showing prior downtrend. BTC was going down and found
support at 5800. As we can see 5800 (2nd) was lowest point after downtrend. Then started
small uptrend and 3rd was reached and resistance was established in that area. Then BTC
started new downtrend. BTC reached again lowest point and support was established in that
area. Then uptrend is started and in 5th BTC has broken resistance. In 6th we can see testing
support and once support showed enough power to hold BTC price above, uptrend was
expected.

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How we can know that this patter will be formed. In my opinion, volume is very
important. As you can see that 7th is showing high volume but 8th is not showing high volume.
It means that in 7th a lot of sellers were out and it is important. When we do not have a lot of
sellers, uptrend is easier to happen. So you have to follow volume too because it is very
important for this pattern.

How to predict potential gain? This is formula: Resistance – support + resistance =

potential gain. It is minimum that is expected. In this case, gain was much higher so it is
important to hold for at least 15% gain because it is expected after this pattern.

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Head and Shoulders Top (Reversal)

A Head and Shoulders reversal pattern forms after an uptrend, and its completion
marks a trend reversal. The pattern contains three successive peaks with the middle peak
(head) being the highest and the two outside peaks (shoulders) being low and roughly equal.
The reaction lows of each peak can be connected to form support, or a neckline.

The Head and Shoulders reversal pattern is made up of a left shoulder, a head, a right
shoulder, and a neckline. Other parts playing a role in the pattern are volume, the breakout,
price target and support turned resistance.

Check below LTC/BTC as an example.

1) To be able to establish head and shoulders reversal pattern we need prior uptrend.
Without prior uptrend, reversal patter can’t be established.

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2) While in an uptrend, the left shoulder forms a peak that marks the high point of the
current trend. After making this peak, a decline ensues to complete the formation of
the shoulder. The low of the decline usually remains above the trend line, keeping the
uptrend intact.
3) From the low of the left shoulder, an advance begins that exceeds the previous high
and marks the top of the head. After peaking, the low of the subsequent decline marks
the second point of the neckline.
4) The advance from the low of the head forms the right shoulder. This peak is lower
than the head (a lower high) and usually in line with the high of the left shoulder.
While symmetry is preferred, sometimes the shoulders can be out of whack. The
decline from the peak of the right shoulder should break the neckline.
5) The neckline forms by connecting low points 1 and 2. Low point 1 marks the end of
the left shoulder and the beginning of the head. Low point 2 marks the end of the head
and the beginning of the right shoulder. Depending on the relationship between the
two low points, the neckline can slope up, slope down or be horizontal. The slope of
the neckline will affect the pattern's degree of bearishness—a downward slope is more
bearish than an upward slope. Sometimes more than one low point can be used to
form the neckline.
6) The head and shoulders pattern is not complete and the uptrend is not reversed until
neckline support is broken.
7) Once support is broken, it is common for this same support level to turn into
resistance. Sometimes, but certainly not always, the price will return to the support
break, and offer a second chance to sell. If resistance holds out, it is confirmation of
downtrend.
8) Volume is very important for this pattern. You could see in this circle expansion of
volume and the majority of candlesticks are green so uptrend is expected and it
happened.
9) In this circle we can see that volume is low and it means that trend won’t be changed
and that’s why it keep dropping and support was broken.

This is not easy to detect but you must know that you do not need perfectly symmetrical
pattern. Left shoulder peak could be higher than right or vice versa. Important thing for this
is that low of head’s decline should break the uptrend. Then we already could imagine what
will happen.

Check below LTC/BTC as an example.

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This breakout is very important because uptrend is broken. Somebody would put here
stop loss and it is not a bad idea but you should see where next potential support is? I would
not put stop loss because next support is very close and even if this trend is over, next support
could be strong enough to hold out. We will do later Fibonacci and it helps here because it
shows support in this green area. I personally used Fibonacci a lot for LTC-BTC trading
because it looks like it follow it. I bought LTC at 0.0101BTC because Fibonacci was showing
support there and I put buy order that was executed and I made nice profit. Once right shoulder
was formed, I realized what is going on and I did not post buy order again.

To sum up, this is very useful but again use this together with other tools like
Fibonacci retracements to make sure where is potential support and is it strong enough to hold
out.

Head and Shoulders Bottom (Reversal)

The Head and Shoulders Bottom, sometimes referred to as an Inverse Head and
Shoulders, is a pattern that shares many common characteristics with its comparable partner,
but relies more heavily on volume patterns for confirmation.

As a major reversal pattern, the Head and Shoulders Bottom forms after a downtrend,
and its completion marks a change in trend. The pattern contains three successive troughs
with the middle trough (head) being the deepest and the two outside troughs (shoulders)
being shallower. Ideally, the two shoulders would be equal in height and width. The reaction
highs in the middle of the pattern can be connected to form resistance, or a neckline.

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Check below LBC/BTC as an example.

1) It is important to establish the existence of a prior downtrend for this to be a reversal

pattern. Without a prior downtrend to reverse, there cannot be a Head and Shoulders
Bottom formation.
2) While in a downtrend, the left shoulder forms a trough that marks a new reaction low
in the current trend. After forming this trough, an advance ensues to complete the
formation of the left shoulder (1).
3) From the high of the left shoulder, a decline begins that exceeds the previous low and
forms the low point of the head. After making a bottom, the high of the subsequent
advance forms the second point of the neckline (2).
4) The decline from the high of the head (neckline) begins to form the right shoulder.
This low is always higher than the head, and it is usually in line with the low of the
left shoulder. While symmetry is preferred, sometimes the shoulders can be out of
whack, and the right shoulder will be higher, lower, wider, or narrower. When the
advance from the low of the right shoulder breaks the neckline, the Head and
Shoulders Bottom reversal is complete.
5) The neckline forms by connecting reaction highs 1 and 2. Reaction High 1 marks the
end of the left shoulder and the beginning of the head. Reaction High 2 marks the end
of the head and the beginning of the right shoulder. Depending on the relationship
between the two reaction highs, the neckline can slope up, slope down, or be
horizontal. The slope of the neckline will affect the pattern's degree of bullishness: an
upward slope is more bullish than a downward slope.
6) The Head and Shoulders Bottom pattern is not complete, and the downtrend is not
reversed until neckline resistance is broken. For a Head and Shoulders Bottom, this
must occur in a convincing manner, with an expansion of volume.
7) Volume is very important one more time. You can notice on our photo expansion of
volume. It is very important for breakout because in this area there are resistance and
in that area there are more buyers and to breakout we need much more buyers and
that’s why volume is going up. Breakout could happen without volume expansion but
it is rare. Usually, there is volume expansion.

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This is very useful patter but it is recommended to use with Fibonacci retracements
and you must track on volume because it could help you to detect potential breakout.

Falling Wedge
The Falling Wedge is a bullish pattern that begins wide at the top and contracts as
prices move lower. This price action forms a cone that slopes down as the reaction highs and

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reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope
and no bias, falling wedges definitely slope down and have a bullish bias. However, this
bullish bias cannot be realized until a resistance breakout.

The falling wedge can also fit into the continuation category. As a continuation
pattern, the falling wedge will still slope down, but the slope will be against the prevailing
uptrend. As a reversal pattern, the falling wedge slopes down and with the prevailing trend.
Regardless of the type (reversal or continuation), falling wedges are regarded as bullish
patterns.

1) To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the
falling wedge will form after an extended downtrend and mark the final low.
2) It takes at least two reaction highs to form the upper resistance line, ideally three. Each
reaction high should be lower than the previous highs.
3) At least two reaction lows are required to form the lower support line. Each reaction
low should be lower than the previous lows. One support is required, but we draw 2
to help you understand that you can use both supports to form this pattern.
4) The upper resistance line and lower support line converge to form a cone as the
pattern matures. The reaction lows still penetrate the previous lows, but this
penetration becomes shallower. Shallower lows indicate a decrease in selling
pressure and create a lower support line with less negative slope than the upper
resistance line.
5) Bullish confirmation of the pattern does not come until the resistance line is broken
in convincing fashion. It is sometimes prudent to wait for a break above the previous
reaction high for further confirmation. Once resistance is broken, there can sometimes
be a correction to test the newfound support
6) One more thing you could use to predict breakout is of course volume. This time,
volume wasn’t so important because in previous dip a lot of sellers were out and the
for breakout we didn’t need high volume. But generally, if volume is high, chances
for breakout are much higher. Volume sticks must be green because if they are red,
support will be broken, not resistance

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As with rising wedges, the falling wedge can be one of the most difficult chart patterns
to accurately recognize and trade. When lower highs and lower lows form, as in a falling
wedge, a security remains in a downtrend. The falling wedge is designed to spot a decrease
in downside momentum and alert technicians to a potential trend reversal. Even though
selling pressure may be diminishing, demand does not win out until resistance is broken. As
with most patterns, it is important to wait for a breakout and combine other aspects of
technical analysis to confirm signals.

Rising Wedge

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The Rising Wedge is a bearish pattern that begins wide at the bottom and contracts
as prices move higher and the trading range narrows. In contrast to symmetrical triangles,
which have no definitive slope and no bullish or bearish bias, rising wedges definitely slope
up and have a bearish bias.

Even though this article will focus on the rising wedge as a reversal pattern, the
pattern can also fit into the continuation category. As a continuation pattern, the rising
wedge will still slope up, but the slope will be against the prevailing downtrend. As a
reversal pattern, the rising wedge will slope up and with the prevailing trend. Regardless of
the type (reversal or continuation), rising wedges are bearish.

1) In order to qualify as a reversal pattern, there must be a prior trend to reverse.

2) It takes at least two reaction highs to form the upper resistance line, ideally three. Each
reaction high should be higher than the previous high.

3) At least two reaction lows are required to form the lower support line. Each reaction
low should be higher than the previous low.

4) The upper resistance line and lower support line converge as the pattern matures. The
advances from the reaction lows (lower support line) become shorter and shorter,
which makes the rallies unconvincing. This creates an upper resistance line that fails
to keep pace with the slope of the lower support line and indicates a supply overhang
as prices increase.

5) Bearish confirmation of the pattern does not come until the support line is broken in
a convincing fashion. It is sometimes prudent to wait for a break of the previous
reaction low. Once support is broken, there can sometimes be a reaction rally to test
the newfound resistance level.

6) Ideally, volume will decline as prices rise and the wedge evolves. An expansion of
volume on the support line break can be taken as bearish confirmation. In our

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example, you can see expansion of volume. Volume sticks are red so breakdown was
expected.

The rising wedge can be one of the most difficult chart patterns to accurately recognize
and trade. While it is a consolidation formation, the loss of upside momentum on each
successive high gives the pattern its bearish bias. However, the series of higher highs and
higher lows keeps the trend inherently bullish. The final break of support indicates that the
forces of supply have finally won out and lower prices are likely. There are no measuring
techniques to estimate the decline – other aspects of technical analysis should be employed
to forecast price targets.

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Rounding Bottom (Reversal)

The Rounding Bottom is referred to as a saucer bottom, and represents a consolidation
period that turns from a bearish bias to a bullish bias.

1) In order to be a reversal pattern, there must be a prior trend to reverse. Ideally, the low
of a rounding bottom will mark a new low or reaction low. When the rounding bottom
does finally form, its low may not be the lowest low of the last few weeks or months.

2) The first portion of the rounding bottom is the decline that leads to the low of the
pattern. This decline can take on different forms: some are quite jagged with a number
of reaction highs and lows, while others trade lower in a more linear fashion.

3) The low of the rounding bottom can resemble a “V” bottom, but should not be too
sharp and should take a few days or weeks to form. Because prices are in a long-term
decline, the possibility of a selling climax exists that could create a lower spike.

4) The advance off of the lows forms the right half of the pattern and should take about
the same amount of time as the prior decline. If the advance is too sharp, then the
validity of a rounding bottom may be in question.

5) Bullish confirmation comes when the pattern breaks above the reaction high that
marked the beginning of the decline at the start of the pattern. As with most resistance
breakouts, this level can become support.

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6) In an ideal pattern, volume levels will track the shape of the rounding bottom: high at
the beginning of the decline, low at the end of the decline and rising during the
advance. Volume levels are not too important on the decline, but there should be an
increase in volume on the advance and preferably on the breakout. We found almost
perfect example where you can see volume expansion before breakout.

A rounding bottom could be thought of as a head and shoulders bottom without readily
identifiable shoulders. The head represents the low and is fairly central to the pattern. The
volume patterns are similar and confirmation comes with a resistance breakout. While
symmetry is preferable on the rounding bottom, the left and right side do not have to be equal
in time or slope. The important thing is to capture the essence of the pattern.

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Triple Top Reversal

The Triple Top Reversal is a bearish reversal. There are three equal highs followed
by a break below support.

Check below as an example.

1) With any reversal pattern, there should be an existing trend to reverse. In the case of
the Triple Top Reversal, an uptrend should precede the formation.

2) All three highs should be reasonably equal, well spaced and mark clear turning
points to establish resistance. The highs do not have to be exactly equal, but should
be reasonably equivalent to each other.

3) As the Triple Top Reversal develops, overall volume levels usually decline. Volume
sometimes increases near the highs. After the third high, an expansion of volume on
the subsequent decline and at the support break greatly reinforces the soundness of
the pattern.

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4) As with many other reversal patterns, the Triple Top Reversal is not complete until a
support break. The lowest point of the formation, which would be the lowest of the
intermittent lows, marks this key support level.

Throughout the development of the Triple Top Reversal, it can start to resemble a
number of other patterns. Before the third high forms, the pattern may look like a Double
Top Reversal. Three equal highs can also be found in an ascending triangle or rectangle. Of
these patterns mentioned, only the ascending triangle has bullish overtones; the others are
neutral until a break occurs. In this same vein, the Triple Top Reversal should also be
treated as a neutral pattern until a breakdown occurs. The inability to break above resistance
is bearish, but the bears have not won the battle until support is broken. Volume on the last
decline off resistance can sometimes yield a clue. If there is a sharp increase in volume and
momentum, then the chances of a support break increase.

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Triple Bottom (Reversal)

The Triple Bottom Reversal is a bullish reversal pattern typically found on bar charts,
line charts and candlestick charts. There are three equal lows followed by a break above
resistance.

Check below and example.

1) With any reversal pattern, there should be an existing trend to reverse. In the
case of the Triple Bottom Reversal, a clear downtrend should precede the
formation.

2) All three lows should be reasonably equal, well-spaced and mark significant turning
points. The lows do not have to be exactly equal, but should be reasonably equivalent.

3) As the Triple Bottom Reversal develops, overall volume levels usually decline.
Volume sometimes increases near the lows. After the third low, an expansion of
volume on the advance and at the resistance breakout greatly reinforces the soundness
of the pattern.

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4) As with many other reversal patterns, the Triple Bottom Reversal is not complete until
a resistance breakout. The highest point of the formation, which would be the highest
of the intermittent highs, marks resistance.

5) Broken resistance becomes potential support, and there is sometimes a test of this
newfound support level with the first correction.

As the Triple Bottom Reversal develops, it can start to resemble a number of patterns.
Before the third low forms, the pattern may look like a Double Bottom Reversal. Three equal
lows can also be found in a descending triangle or rectangle. Of these patterns mentioned,
only the descending triangle has bearish overtones; the others are neutral until a breakout
occurs. Similarly, the Triple Bottom Reversal should also be treated as a neutral pattern until
a breakout occurs. The ability to hold support is bullish, but demand has not won the battle
until resistance is broken. Volume on the last advance can sometimes yield a clue. If there is
a sharp increase in volume and momentum, then the chances of a breakout increase.

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Bump and Run Reversal (Reversal)

As the name implies, the Bump and Run Reversal (BARR) is a reversal pattern that
forms after excessive speculation drives prices up too far, too fast. Developed by Thomas
Bulkowski, the pattern was introduced in the June-97 issue of Technical Analysis of Stocks
and Commodities and also included in his book, the Encyclopedia of Chart Patterns.

The pattern was originally named the Bump and Run Formation, or BARF.
Bulkowski decided that Wall Street was not ready for such an acronym and changed the
name to Bump and Run Reversal. Bulkowski identified three main phases to the pattern:
lead-in, bump, and run. We will examine these phases and also look at volume and pattern
validation.

Check an example below.

1) The first part of the pattern is a lead-in phase that can last 1 month or longer and forms
the basis from which to draw the trend line. During this phase, prices advance in an
orderly manner and there is no excess speculation. The trend line should be
moderately steep. If it is too steep, then the ensuing bump is unlikely to be significant
enough. If the trend line is not steep enough, then the subsequent trend line break will
occur too late. Bulkowski advises that an angle of 30 to 45 degrees is preferable. The
size of the angle will depend on the scaling (semi-log or arithmetic) and the size of
the chart. It is probably easier to judge the soundness of the trend line with a visual
assessment.

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2) The bump forms with a sharp advance, and prices move further away from the lead-
in trend line. Ideally, the angle of the trend line from the bump's advance should be
about 50% greater than the angle of the trend line extending up from the lead-in phase.
Roughly speaking, this would call for an angle between 45 and 60 degrees. If it is not
possible to measure the angles, then a visual assessment will suffice.

3) It is important that the bump represent a speculative advance that cannot be sustained
for a long time. Bulkowski developed what he calls an “arbitrary” measuring
technique to validate the level of speculation in the bump. The distance from the
highest high of the bump to the lead-in trend line should be at least twice the distance
from the highest high in the lead-in phase to the lead-in trend line. These distances
can be measured by drawing a vertical line from the highest highs to the lead-in trend
line.

4) After speculation dies down, prices begin to peak and a top forms. Sometimes, a small
double top or a series of descending peaks forms. Prices begin to decline towards the
lead-in trend line, and the right side of the bump forms.

5) The run phase begins when the pattern breaks support from the lead-in trend line.
Prices will sometimes hesitate or bounce off the trend line before breaking through.
Once the break occurs, the run phase takes over, and the decline continues.

6) After the trend line is broken, there is sometimes a retracement that tests the newfound
resistance level. Potential support-turned-resistance levels can also be identified from
the reaction lows within the bump.

7) As the price advances during the lead-in phase, volume is usually average and
sometimes low. When the speculative advance begins to form the left side of the
bump, volume expands as the advance accelerates.

The Bump and Run Reversal pattern can be applied to mid-term or long-term tradng.
As stated above, the pattern is designed to identify speculative advances that are unsustainable
for a long period. Because prices rise very fast to form the left side of the bump, the
subsequent decline can be just as ferocious.

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