Continue reading...I use chart patterns in my trading because they give me tips on how a stock will perform. Sometimes the tip turns out to be a lie, but that’s okay. I use stops to limit losses (don’t you?). When the tips are accurate, I clean up. This article discusses two such tips: partial declines and partial rises. They forecast the breakout direction from a chart pattern.
When I wrote this in January 2003, we were still in a bear market, and so I concentrated on partial declines — they predict upward breakouts. What does a partial decline look like? Consider Figure 1, a chart of a broadening bottom. That’s my term for what’s usually called a broadening top, but I found performance differences between tops and bottoms. For the latest statistical information, consult my book, Encyclopedia of Chart Patterns, Second Edition.
/section/system/images/2212/original/FIG1.gif?1287790884caption: Figure 1: Broadening bottom. A partial decline sees prices tumble but they do not come close to the...
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