Interface Brokerage and Research Ltd.

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A REPORT

ON

BASICS OF TECHNICAL ANALYSIS


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Table of Contents

Abstract 6

Introduction 7

Company Profile 9

The Philosophy of Technical Analysis 10

Dow Theory 14

Charts 18

Support & Resistance 23

Trend lines & Channels 28

Chart Pattern Analysis 36

Reversal Patterns1. Double Top 372. Head & Shoulder Top 41

3. Head & Shoulder Bottom 454. Falling Wedge. 485. Rising Wedge 526. Rounding Bottom 557. Triple Top. 598. Triple Bottom 62

Continuation Patterns1. Pennant/Flag. 652. Symmetric Triangle 683. Ascending Triangle 724. Descending Triangle 765. Rectangle 806. Price Channel 84

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Technical Indicators 87

Trend Indicators

1. Moving Averages 882. MACD 92

-MACD Histogram 963. ADX 98

Momentum Indicators

1. Rate Of Change (ROC) 992. RSI. 1003. Williams % R 102

Bombay Stock Exchange (BSE) 104

National Stock Exchange (NSE) 113

Leading Stocks Short term & Medium Term Analysis 118

Report Summery 125

References 126

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Abstract

Technical analysis is study of predicting prices of securities for future. The main aim ofTechnical analysis is to generate returns by letting person decide when to enter and when toexit in the security. Bottom line is to buy at tough (deep decline) and to sell at peak to get

substantial amount of return/profit. By study of technical analysis person will be able totake decision of his trades/investments.

Technical analysis uses various charts for analysis. This project throws lights on variousbasic aspects of technical analysis. It is not possible to cover each and every aspect oftechnical analysis. But I have tried to cover main and basics of technical analysis. As todayin stock market decisions are very important and most of the people make investment onadvises of brokers. Through this report any person who doesnt know anything aboutTechnical Analysis can also study it easily and make decisions on his own.

In this final report I have covered different various types of charts, various formations of

chart patterns, some theories related to technical analysis, technical indicators for betteranalysis. I have covered as much examples of various charts and indicators as possible sothat one can understand them. In terms of charts I have used mostly candlestick chartsamongst all three charts for analysis of security as they give clear picture of pricemovements during particular period.

I have referred some of the books on technical analysis and some of the Websites for charts.At last I have analyzed price movements of various Leading Stocks of Indian stock marketthrough their charts using technical analysis and with the use of available data I have setshort to medium term targets.

Introduction

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Technical Analysis is the forecasting of future price movements based on study of pastprice movements. It may not give you the absolute predictions but it can give you generalidea of the price movement which is likely to be in future. Technical Analysis is applicableto stocks, commodities, indices, futures or tradable instruments where the prices are

influenced by force of demand and supply. Price refers to any combination of open, low,close, and high of any stock over a specific period of time. Time frame can be intraday(daily), weekly, monthly or yearly. Technical analysis is focused directly on the bottom linei.e. what is the price? , where has it been? , and what can it be in the future? It is used tomake investment decisions by analyzing strengths and weaknesses of any stock with use ofvarious chart patterns and other indicators.

In technical analysis various types of charts are used. For any investor or people who areinvolved in the stock market it is very important to know what will happen to prices ofstocks tomorrow. Technical Analysis is one of the ways to forecast future price movements.By studying the basics of Technical Analysis one can know that when to exit and when to

enter in the markets.

There are four types of charts.

1. Line Charts2. Bar Charts3. Candle Stick Charts4. Point and Figure Charts

Chart patterns analysis can be used to make short term or long term forecasts. There aregenerally two types of chart patterns

1. Reversal Chart Patterns2. Continuation chart patterns.

Some different types of chart patterns are as follows.

Double Top (Reversal)

Double Bottom (Reversal)

Head and Shoulders Top (Reversal)

Head and Shoulders Bottom (Reversal)

Falling Wedge (Reversal)

Rising Wedge (Reversal)

Rounding Bottom (Reversal)

Triple Top (Reversal)

Triple Bottom (Reversal)

Bump and Run Reversal (Reversal)

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Flag, Pennant (Continuation)

Symmetrical Triangle (Continuation)

Ascending Triangle (Continuation)

Descending Triangle (Continuation)

Rectangle (Continuation)

Price Channel (Continuation)

Chart patterns are used along with the market and technical indicators to study the price

movements and historical data. Market indicators are presentation of the historical data in

a line form.. Volume as an indicator also plays very important role.

Each and every indicator has its own meaning and interpretation. But to be more accurate in

analysis one should use more than one indicator to confirm the price trend or movements.

There are many technical indicators and chart overlays which can be used for analysis.

Some of them are as follows:

Average Directional Index (ADX) - A technical indicator system that attempts to

quantify how strongly a stock is trending.

Moving Average Convergence/Divergence (MACD) - A technical indicator system

that combines several moving averages to better show a stock's trend and

momentum.

Moving Averages Different types of moving averages.

Rate of Change (ROC) and Momentum - A technical indicator that shows the speed

at which a stock's price is changing.

Relative Strength Index (RSI) - A technical indicator that tries to quantify a stock's

current direction and strength.

Williams %R- A technical indicator that uses Stochastics to determine overbought

and oversold levels.

I have analyzed the charts of leading stocks of Indian Stock Market indices using

technical analysis and some of the indicators.

COMPANY PROFILE

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INTERFACE BROKERAGE & RESEARCH LTD

Interface Group is in Finance business since 1988. The group is well diversified intovarious activities viz. Operations into Primary Market and Secondary Market in the Stock

Market, intermediary in the Debt Market, Fund based activities under the flagship companythe Interface Financial Services Ltd.

Interface Group has a Corporate Membership of Ahmedabad Stock Exchange, NationalStock Exchange of India for Capital Market Segment and Dealership on OTC Exchange ofIndia.

Interface Group has achieved remarkable growth as Broker Underwriter and has establishedits presence as a leading Primary Market Player at National Level.

Interface Group is engaged in fund based activities such as lease Hire Purchase, Car

Finance, securitization, ICD, Loan against shares etc.

Interface group is also engaged in the field of Marketing Financial Instruments andMarketing Fixed Deposits of state as well as National Level reputed ManufacturingAnd finance companies, States and central Government Undertakings, private sector Banks.The Group is acting as Managers for the Fixed Deposits of several corporate of repute. Thegroup is also acting as Direct Brokers for more than 50 companies for mobilizing theirfixed deposits. The group is also marketing RBI Tax Free Relief Bonds, Mutual Funds ofreputed AMCs, UTI Schemes etc. and mobilizing huge amount.

Interface group is actively engaged in the Money Market and doing good business in

Central as well as State Government Dated Securities and is registered Money MarketBroker with RBI. Besides the group is also dealing in Rated Bonds of Public Sector, Privatesector as well as Nationalized Banks.

Interface Group has large network of Sub-brokers in all most major centers of the state forPrimary Market, Fixed Deposits Mobilization, and Mutual Funds etc. Besides the group hasa very good relationship with high net worth clients all over Gujarat.

The Philosophy of Technical Analysis

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Introduction:

The methods used to analyze and predict the performance of a company's stock fall intotwo broad categories:

1) Fundamental Analysis2) Technical Analysis

Those who use technical analysis look for peaks, bottoms, trends, patterns and otherfactors affecting a stock's price movement and then make buy/sell decisions based onthose factors. It is a technique many people attempt, but few are truly successful at it. Theworld of technical analysis is huge today. There are literally hundreds of different patternsand indicators that investors claim to have success with.

The term technical in its application to the stock market has come to have a very specialmeaning, quite different from its ordinary dictionary definition. It refers to the study of themarket itself as opposed to the study of the goods in which the market deals. TechnicalAnalysis is the science of recording, usually in graphic form, the actual history of trading(price changes, volume of transactions, etc.) in a certain stock or in the Averages andthen deducing from that pictured history the probable future trend.

Some History of Technical Analysis:

The term technical analysis is a complicated-sounding name for a very basic approach toinvesting. Simply put, technical analysis is the study of prices, with charts being theprimary tool.

The roots of modern-day technical analysis stem from the Dow Theory, developed around1900 by Charles Dow. Stemming either directly or indirectly from the Dow Theory, theseroots include such principles as the trending nature of prices, prices discounting all knowninformation, confirmation and divergence, volume-mirroring changes in price, andsupport/resistance.

Technical analysis is the study of specific securities and the overall market based ondemand/supply relationship.

A technician is a person who uses technical analysis to make investment decisions. The

technical analyst bases market forecasting on price movement and other indicators.Technical analysis approaches should be tied to the individual investors perspective,temperament, personality, and risk profile.

What Is Technical Analysis?

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Technical Analysis is the science of recording, usually in graphic form, the actual historyof trading (price changes, volume of transactions, etc.) in a certain stock or in theAverages and then deducing from that pictured history the probable future trend.

Technical analysis is a method of evaluating securities by analyzing statistics generated by

market activity, past prices and volume. Technical analysts do not attempt to measure asecurity's intrinsic value; instead they look at stock charts for patterns and indicators thatwill determine a stock's future performance.

Technical analysis has become increasingly popular over the past several years, as moreand more people believe that the historical performance of a stock is a strong indication offuture performance. The use of past performance should come as no surprise. People usingfundamental analysis have always looked at the past performance of companies bycomparing fiscal data from previous quarters and years to determine future growth. Thedifference lies in the technical analyst's belief that securities move according to verypredictable trends and patterns. These trends continue until something happens to changethe trend, and until this change occurs, price levels are predictable. There are manyinstances of investors successfully trading a security using only their knowledge of thesecurity's chart, without even understanding what the company does.

However, although technical analysis is a terrific tool, most agree it is much moreeffective when used in combination with fundamental analysis.

The Basic Assumptions:

The field of technical analysis is based on three assumptions:

1. The market discounts everything.2. Price moves in trends.3. History tends to repeat itself.

1. The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement,ignoring the fundamental factors of the company. However, technical analysisassumes that, at any given time, a stock's price reflects everything that has or couldaffect the company - including fundamental factors. Technical analysts believe thatthe company's fundamentals, along with broader economic factors and market

psychology, are all priced into the stock, removing the need to actually considerthese factors separately. This only leaves the analysis of price movement, whichtechnical theory views as a product of the supply and demand for a particular stockin the market.

2. Price Moves in Trends

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In technical analysis, price movements are believed to follow trends. This meansthat after a trend has been established, the future price movement is more likely tobe in the same direction as the trend than to be against it. Most technical tradingstrategies are based on this assumption.

3. History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself,mainly in terms of price movement. The repetitive nature of price movements isattributed to market psychology; in other words, market participants tend toprovide a consistent reaction to similar market stimuli over time. Technicalanalysis uses chart patterns to analyze market movements and understand trends.Although many of these charts have been used for more than 100 years, they arestill believed to be relevant because they illustrate patterns in price movements thatoften repeat themselves.

Adaptability to Different Markets and Investment Time Horizons:

The beauty of technical analysis is that it can be applied effectively to virtually any tradingmedium and investment time horizon. A technician can analyze stocks, bonds, options,mutual funds, commodities, and many other forms of investment for buy or sellopportunities. And one can do so by examining tic-by-tic, intraday, daily, weekly,monthly, or some other interval of data to use technical analysis for a wide range of timehorizons- from very short-term to very long-term perspectives.

The best manner in which to use technical analysis depends on ones approach to themarket. Everyone invests differently. We all have different levels of stress, different

temperaments, and different amounts of capital. It is important to apply technical analysisin a manner that complements ones own personality and individual investmentsphilosophy. Obviously, those whose time, nerves, and capital are limited will want to passup very short-term trading opportunities (such as intraday trading of stock index futures)and, perhaps, use longer-term technical analysis derived buy and sell signals for stocks ormutual funds. By recognizing ones individual investment strengths and weakness, usersof technical analysis can find the trading medium and time horizons that are best for theirindividual investment situations.

Technical analysis is done from four important view points which are as follows:

Price: Changes in price reflect changes in investor attitude and demand forand supply of securities.

Time: The longer time price takes for a reversal in trend, the greater theprice change that would follow.

Volume: The intensity of price change is reflected in the volume oftransactions. An increase in price supported by low volumes indicates that thechange in the price is not so strong

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.Breadth: Breadth of the market indicates the extent to which price changeshave taken place in the market in accordance with the overall market trend. Itindicates that whether a change in trend of prices spread across the most sectors or itis concentrated in only few types of scrip.

Technical analysis is subjective as the interpretation of the analysis varies from person toperson for the same stock because it depends on the style of individual investors.

DOW THEORY

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The basic principles of the Technical Analysis originated form the Dow Theory. DowTheory only describes the direction of market trends, and does not attempt to forecastfuture price movements or measures size of such market trends.

The five basic tenets of the Dow Theory are as follows:

1. The Average Discounts Everything:

The share prices that are determined in the market evolved out of a discountingprocess that takes all known and predictable factors into account.

2. The Market has three types of Movements:

Primary Movements

Primary movements, which last from about a year to several years, represent the

major market trends. It can either be a rising (bull) trend or a falling trend (bear).Primary trends are long term movements in prices, interrupted by swings in theopposite direction.

Secondary Movements

A secondary movement is defined as an important decline in a bull market, oradvance in a bear market lasting from three weeks to as many months. Whenreaction is more than 50% of the preceding primary trend, it is difficult to saywhether the reaction is secondary or it signals a new primary trend in the oppositedirection.

Minor Movements

Movements in prices that form only a part of a primary trend or a secondarymovement are called Minor Movements. Generally intraday movements are calledminor movements.

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In this chart of SBI for the last 5 years, the major trend foe the last 5 years isuptrend (Green Line). But from middle of 2004 to middle of 2005 the stock hasreacted against its major trend i.e. uptrend (Red line). So it can be called asSecondary Reactions. Now for this 5 year trend, the weekly or daily fluctuationsare called Minor trend. Here the purple rectangles show the minor trends in thestock.

3. Price Action Determines the Trend:

A trend can be called primarily bullish when successive rallies lead to peaks thoseare higher than the preceding ones (Green Lines) and when troughs reached by theintervening secondary reactions are above the preceding troughs.

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In the above chart a bearish trend is marked by a series of descending peaks andtroughs. (Red Lines) A reversal in primary trend is indicated when the abovecondition is not satisfied.

4. Lines Indicate Movement

In certain cases, price movements which initially look like secondary movementspersist within a narrow range and form lines (Green lines).

A line is formed by price movements within a range of 5 percent of its meanaverage. This is called an accumulation. (i.e. when a line is formed in between aprimary bear trend).If prices advance above an accumulation, it marks a reversal in

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the bearish trend and if price continues to fall after an accumulation, the line isonly a consolidation of the bearish trend and it is a secondary price movement.

5. Price volume relationship provide background

Volume plays very major role in technical analysis. The relation between pricesand volume is very important. The volume is normally expected to complement themovement in prices. A reversal trend is signaled if dull volume supports a rally, ora high volume, a downtrend.

Charts

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A price chart is a sequence of prices plotted over a specific time frame. Technical analysisis based on charts. Therefore sometimes technical Analysts are called Chartists.

On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal

axis) represents the time scale. Prices are plotted from left to right across the x-axis with themost recent plot being the furthest right.

A graphical historical record makes it easy to spot the effect of key events on a security'sprice, its performance over a period of time and whether it's trading near its highs, near itslows, or in between.

There are basically four types of charts which are as follows:

1. Line Charts2. Bar Charts3. Candle Stick Charts4. Point and Figure Charts

But only first three of the charts are used very frequently for the analysis part.

Line Charts:

A line Chart is the simplest type of chart. Line Chart is drawn by plotting the closing priceof the stock on a given day and connecting them to make charts. They are widely usedcharts. The price is marked on the Y-axis and the period of time on the X-axis. Line chartsstrength comes from its simplicity. The line chart of SENSEX for last 3 months is as below.

Bar Charts:

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A bar chart displays any securitys open, low, high and closing prices. As illustrated in thebar chart below, the top of each vertical bar represents the highest price of a security duringthat period and the bottom of the bar represents the lowest price. The close is the shorthorizontal line crossing the vertical bar. On a daily chart, each bar represents the high, lowand close for a particular day. Weekly charts would have a bar for each week based on

Friday's close and the high and low for that week.

The open price is displayed as a short horizontal line extending to the left of the bar and theclose price is displayed as a short horizontal line extending to the right of the bar.

Candlestick Charts:For a candlestick chart, the open, high, low and close are all required. A daily candlestick isbased on the open price, the intraday high and low, and the close. A weekly candlestick isbased on Monday's open, the weekly high-low range and Friday's close.

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Many investors believe that candlestick charts are easy to read because of the relationshipbetween the open and the close. White (clear) candlesticks form when the close is higherthan the open and black (solid) candlesticks form when the close is lower than the open.The white and black portion formed from the open and close is called the body (white bodyor black body). The lines above and below are called shadows and represent the high andlow.

Price Scaling:

There are two methods for displaying the price scale along the y-axis: arithmetic andlogarithmic. An arithmetic scale displays different points (or price in rupees) as the samevertical distance. Whatever may be the price of security on Y-axis, the distance between theprices is same. Each unit of measure is the same throughout the entire scale. If a stockadvances from 10 to 80 over a 6-month period, the move from 10 to 20 will appear to be thesame distance as the move from 70 to 80. Even though this move is the same in absoluteterms, it is not the same in percentage terms.

A logarithmic scale measures price movements in percentage terms. It is also known asSemi-Log Scale. An advance from 10 to 20 would represent an increase of 100%. Anadvance from 20 to 40 would also be 100%, as would an advance from 40 to 80. All threeof these advances would appear as the same vertical distance on a logarithmic scale.

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(Arithmetic Scale)

(Logarithmic/ Semi Log Scale)

The above graphs show the candlestick charts ofBharti Airtel for the last 9 months. Bothgraphs are the same but their price scaling on Y-axis is done differently.

Key points on the benefits of arithmetic and semi-log scales:

Arithmetic scales are useful when the price range is confined within a relatively tight range.

Arithmetic scales are useful for short-term charts and trading. Price movements

(particularly for stocks) are shown in absolute rupee terms and reflect movements for each

rupee.

Semi-log scales are useful when the price has moved significantly, be it over a short or

extended time frame

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Trend linestend to match lows better on semi-log scales.

Semi-log scales are useful for long-term charts to gauge the percentage movements over a

long period of time.

The choice of which charting method to use will depend on personal preferences and

trading or investing styles.

SUPPORT AND RESISTANCE

In this section, the concepts of support and resistance will be more fully explained. In addition,two sophisticated applications of support and resistance, namely percentage retracements andspeed resistance lines, will be examined.

Support and Resistance:In the Wall Street environment, the terms support and resistance are almost synonymous withdemand and supply, respectively. Support is a price level at which there is adequate demandfor a security to stop its downward price movement and, normally, turn prices upward.Support occurs at reaction lows

Support:

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2001 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2003 Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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BALLARPURINDS (104.900, 109.500, 104.500, 107.750, +3.45000)

Resistance is a price level at which there is a significant supply of a stock causing prices tohalt an upward move and, typically, turn prices down. (Sec Figure 7-2.) Resistance occurs atreaction highs.

Resistance

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RELIANCECAPITAL (594.000, 673.800, 594.000, 670.300, +77.7500)

In an uptrend, both support and resistance levels rise as illustrated in Figure 7-3. Typically,support levels hold while resistance offers temporary halts to upward movements in prices.Resistance levels are repeatedly broken until the uptrend is reversed.

Rising support and resistance

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2003 M A M J J A S O N D 2004 M A M J J A S O N D 2005 M A M J J A S O N D 2006 M A M J J

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Support

IDBI (74.2000, 83.4000, 73.6000, 81.2500, +7.85000)

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Role Reversal

In an uptrend, resistance levels often become support levels after they are brokensignificantly as illustrated in Figure

Up trend role reversal from resistance to support

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PUNJAB TRACTORS (314.000 , 314.000, 305.100, 305.400, -6.55002)

In a downtrend, the opposite occurs as support levels frequently become resistance levels.

Down trend role reversal from support to resistance

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TN NEWSPRINT (82.0000, 86.5000, 81.2500, 83.6500, +1.45000)

The likelihood of role reversal, from support to resistance or resistance to support, dependson three factors. First, the greater the volume that occurs at a support or resistance level,the more significant the level is and, thus, the more likely a candidate the level is for role

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reversal. Second, the longer that prices trade near the support or resistance level, thegreater the chance of role reversal. For example, the probability of role reversal isenhanced if consolidation occurs near a support or resistance level for a few weeks ratherthan a few days. Finally, the more recently that trading occurred at the level, the fresher itis in traders' minds, and the more likely it is that role reversal will occur.

Trend Reversals

In an uptrend, a trend reversal occurs when prices are held at a resistance level. A double topor some other reversal formation develops at that point and the trend changes direction asillustrated in Figure

Trend reversal at Top

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TN NEWSPRINT (82.0000, 86.5000, 81.2500, 83.6500, +1.45000)

A trend reversal occurs in a downtrend when prices are unable to penetrate a support level. Inthis case, a bottom reversal pattern is formed, and the trend changes direction to the upside asillustrated in Figure

T

rend reversal at bottom

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DENA BANK (29.9000, 34.1500, 29.1000, 33.8000, +4.10000)

Keep in mind that a trend reversal is not signaled by the first failure to break through aresistance level (in an uptrend) or a support level (in a downtrend). A reversal pattern mustfully develop before one gets the signal that the trend has changed. In other words, a tradershould not rush to sell all of his or her securities or sell short just because prices have held at aresistance level. Likewise, one should not load up on securities or cover short positions justbecause prices initially fail to penetrate a support level. Wait for more evidence that a trendreversal is occurring.

Percentage Retracements

After prices move either up or down for a period of time, they usually move in the opposite

direction, retracing a portion of the previous move. Subsequently, prices continue in theoriginal trend direction.

Countertrend price moves frequently move by a percentage range amount. Often priceswill retrace from a minimum of one-third (or 33 percent) to a maximum of two-thirds (67percent) of its previous move before continuing in its original trend direction.

Some traders view a retracement of 33 percent to 50 percent as a buying opportunity in anuptrend or a selling opportunity in a downtrend. The two-thirds level is a critical area. Ifprices move past the two-thirds retracement level, a trend reversal is likely.

Trend lines and Channels

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As shown above, one of the principles of technical analysis is that prices move in trends. Thesetrends can be up, down, or sideways as illustrated in Figure An uptrend is characterized bysuccessively higher highs and higher lows. A downtrend occurs on successively lower highsand lower lows. A sideways trend reflects horizontal price movement.

Trends can be brief or of long duration. They are typically classified as short-, intermediate-, orlong-term. Although there are no generally accepted definitions of these three terms, short-termroughly refers to the next three months; intermediate-term is about three to six months from thepresent time; and long-term is considered to be approximately six months to one year from thecurrent period.

Investors try to determine when prices are in an uptrend or downtrend. They profit bydetermining the trend and then following it until it is reversed. Of the many charting toolsavailable, the trendline is most widely used by technicians to identify trends and trendreversals.

UP TREND

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AUROBINDO PHARMA(614.900, 635.000, 606.100, 627.100, +17.0000)

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DOWN TREND

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109DABUR (I) (91.8500, 94.6000, 90.1000, 93.4000, +2.70000)

SIDEWAYS

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158DABUR (I) (91.8500, 94.6000, 90.1000, 93.4000, +2.70000)

How Trendlines Are Drawn

Drawing trendlines is easy. A trendline is simply a straight line that connects a series of securityprices, either tops or bottoms.

An up trendline is a straight line that connects a series of reaction lows, as illustrated inFigure.Note that the trendline appears at the bottom of the price pattern and is drawn up andto the right.

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UP TREND LINE

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760AUROBINDO PHARMA (614.900, 635.000, 606.100, 627.100, +17.0000)

A down trendline is a straight line that connects a series of rally tops as illustrated inFigure. Note that, in this case, the trendline is at the top of the price pattern. It is drawn downand to the right.

DOWN TRENDLINE

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230BANK OF BARODA (224.000 , 227.90 0, 219.150, 220.550, -6.2000 0)

Some guidelines to use when drawing trendlines are appropriate. First of all, there must be atleast two tops or bottoms to begin a trendline. This only makes sense, because one must havetwo points in order to draw a straight line (Second, after drawing a trendline based on two tops

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or bottoms, one will frequently find that a higher top or lower bottom has been made, requiringthe trendline to be redrawn.

SIGNIFICANCE OF A TRENDLINE

The significance of a trendline is determined by two factors, namely the number of points (topsor bottoms) that the trendline goes, through and the length of time the trendline has persistedwithout being penetrated.

Many technicians argue that although it only takes two points (tops or bottoms) to draw atrendline, connection to a third point (top or bottom) is required for the trendline to beconfirmed as valid. Each time prices move back to the trendline and then renew theiradvance (in the case of an up trendline) or decline (in the case of a down trendline) thesignificance of the trendline is enhanced.

The length of the trendline indicates the period of time that prices have remained above orbelow the trendline. Obviously, the longer that period is, the greater the significance of the

trendline. For example, a trendline that has not been penetrated for 10 months is moresignificant than one that has held for 10 weeks or 10 days.

I addition to the number of points that a trendline goes through and the length of time thetrendline has persisted, some technicians feel the angle of the trendline adds to thesignificance of a trendline. In general, the closer to horizontal the trendline is, the greaterthe significance of any penetration through it. Very steep trendlines can easily be brokenby brief sideways consolidation moves; trendlines that are less steep are not subject tomany short-term price movements (that are often inconsistent with the current trend).

VALIDITY OF TRENDLINE PENETRATION

Once a trendline has been established, a change in the direction of the trend is signaled byprices breaking through the trendline. In the case of an up trend-line, this occurs asillustrated in Figure 64. Figure 6-5 shows the penetration of a down trendline.

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PENETRATION OF UP TRENDLINE

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BANK OF BARODA (224.000, 227.900, 219.150, 220.550, -6.20000)

PENETRATION OF DOWN TRENDLINE

Two criteria are used to determine the validity of a trendline penetration. The first criterionis the extent of penetration how far prices have moved past the trendline. There is noright answer to the question: How far do prices have to move before the breaking of atrendline is considered valid? It depends to a great degree on the volatility of the security.However, some technicians use a three percent rule in regard to stocks. If the closing pricefor the day is three percent lower (for an up trendline) or higher (for a down trend-line)then the penetration is viewed as decisive and valid. The three percent move does not haveto happen in one day, although it is not unusual for prices to do so.

Some technicians also use a time filter. For example, if prices close above an up trendlineor below a down trendline for two days in a row, it is viewed as a valid penetration andprices are likely to continue their reversal

The second criterion relates to the volume. The validity of a trendline penetration isenhanced if it is accompanied by expanding volume (especially when down trendlines arebroken). However, it is not essential for volume to increase for there to be a validpenetration. In other words, the extent of penetration is more important than its volumecharacteristics.

Trendline Role Reversal

Once a TRENDLINE is decisively penetrated, it normally changes its role from one ofsupport to one of resistance for an up trendline or resistance to support for a downtrendline

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Note in both Figures prices first moved away from the trendline, then back lo it, thenaway again. This is called a pull-backand is not uncommon. Pull-backs offer investorsgreat entry points for buying or selling short.

ROLE REVERSAL FROM SUPPORT TO RESISTANCE

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SupportResistance

MPHASIS BFL (290.000, 295.850, 287.100, 290.300, +0.94998)

ROLE REVERSAL FROM RESISTANCE TO SUPPORT

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BHARAT FORGE (323.900, 327.000, 317.000, 322.950, +2.70001)

TREND CHANNEL

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In many instances, prices repeatedly move about the same distance away from a trendlinebefore returning to the trendline. In these cases, a straight line can be drawn connecting thepeaks of rallies in an uptrend or the bottoms of declines in a downtrend. That line is oftenparallel to the trendline and is called a return orchannel line. Together the channel line andtrendline create a trend channel, a range within which prices are moving.

Figures illustrate trend channels in an uptrend and downtrend, respectively

UP TREND CHANNEL

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440CORPORATION BANK (275.000, 298.500, 265.000, 292.000, +17.6000)

DOWN TREND CHANNEL

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AVENTIS PHARMA (1,259.00, 1,275.00, 1,240.30, 1,258.40, -11.6000)

Well defined trend channels appear most frequently in charts of actively traded securities.Thinly traded securities offer little opportunity for trend channels to develop.

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Trend channels can be used in many fashions. Novice technicians often use trend channels todetermine good profit-taking levels. For example, in an uptrend, they will sell a stock whenit reaches the upper level of its trend channel.

More experienced technicians watch price movements within the two boundary lines of the

trend channel looking for a warning signal that the trend direction is changing. If, in an upwardtrend channel, prices rally up from the trendline but fail to reach the upper channel line, itsignals a deterioration of the trend and probability that the lower line will be broken.Frequently, the distance from the top of the failed rally to the channel line equals the distanceby which the next move down penetrates the trendline.

Similarly, in a downward trend channel, if prices drop from the trend-line but fail to reach thebottom channel line, it signals a deterioration of the trend and probability that the upper linewill be broken. Likewise, the distance from the bottom of the failed attempt to reach thechannel line to the channel line often is equal to the distance by which the next rallypenetrates the trendline.

Trend channels can be used in another way. If prices break through the upper line in anupward trend channel, an acceleration of the existing uptrend is signaled. At this point, someinvestors will buy additional positions.

On the other hand, if prices move through the bottom line of a downward trend channel, theexisting downtrend appears to be picking up pace. Short positions may be increased at thispoint.

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Chart Pattern Analysis

Chart Patterns put all buying and selling into perspective by consolidating the forces ofsupply and demand into a concise picture. Chart patterns provide a framework to analyzethe battle raging between bulls and bears.More importantly, chart patterns and technical

analysis can help determine who is winning the battle (bear or bull) and allow traders andinvestors to position themselves accordingly.

Chart patterns analysis can be used to make short term or long term forecasts. The data canbe intraday, daily, weekly or monthly and the patterns can be as short as one day or as longas many years.

There are generally two types of chart patterns

1. Reversal Chart Patterns2. Continuation chart patterns.

Reversal Patterns:

Double Top

Double Bottom

Head and Shoulders Top

Head and Shoulders Bottom

Falling Wedge

Rising Wedge

Rounding Bottom

Triple Top

Triple Bottom

Continuation Patterns:

Flag, Pennant

Ascending Triangle

Descending Triangle

Rectangle

Price Channel

34
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Reversal Patterns:

1. Double Top:

The double top is a major reversal pattern that forms after an extended uptrend. As its nameimplies, the pattern is made up of two consecutive peaks that are roughly equal, with amoderate trough in-between.

Although there can be variations, the classic double top pattern marks at least anintermediate change, if not long-term change, in trend from bullish to bearish. Manypotential double tops can form along the way up, but until key support is broken, a reversalcannot be confirmed.

Key Points in Formation of Double Top Reversal Pattern:

Prior Trend: There must be an existing trend to reverse. A significant uptrend of several

months should be in place.

First Peak: The first peak should mark the highest point of the current trend. The first peak

is fairly normal and the uptrend is not in question at this time.

Trough: After the first peak, a decline takes place that typically ranges from 10 to 20%.

Volume on the decline from the first peak is usually irrelevant.

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Second Peak:: The advance from the lows usually occurs with low volume and meets

resistance from the previous high. Resistance from the previous high should be expected.

The pattern still needs to be confirmed. The time period between peaks can vary from a few

weeks to many months, with the norm being 1-3 months. While exact peaks are preferable

but usually a peak within 3% of the previous high is adequate.

Decline from Peak:: The subsequent decline from the second peak should witness an

expansion in volume and/or an accelerated down trend. Such a decline shows that the forces

of demand are weaker than supply.

Support Break: Even after trading down to support, the double top and trend reversal are

still not complete. Breaking support from the lowest point between the peaks completes the

double top. This too should occur with an increase in volume and/or an accelerated down

trend.

Support Turned Resistance:: Broken support becomes potential resistance.

Price Target: The distance from support break to peak can be subtracted from the support

break for a price target. This would infer that the bigger the formation is, the larger the

potential decline.

To avoid misleading Formation of Double Tops, following should be taken intoconsideration.

The peaks should be separated by about a month. If the peaks are too close, theycould just represent normal resistance.

Ensure that the low between the peaks declines at least 10%. Declines less than 10%may not be indicative of a significant increase in selling pressures.

When the security does advance, look for a contraction in volume as a furtherindication of weakening demand.

The most important aspect of a double top is to wait for support to be broken in a

convincing manner, and usually with an expansion of volume.

Until support is broken in a convincing manner, the trend remains up.

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The double top in Pfizer Ltd. took about 6 months to form.

1. From a low near 750 in November-05, Pfizer advanced to 1200 by January-06. The

trend line extending up from November-05 is an internal trend line.

2. From the first peak, the stock declined around 16.67% to form the trough.

3. After reaching a low near 975 in Mid February, the trough was formed.

4. The decline from 1220 occurred with three black crows and increased volume (red

oval). Furthermore, RSI showed overbought level (>70) and then good amount of selling

pressure was seen from RSI.

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5. From mid April to mid May, the stock traded for about 1 month at support of the

inner trend line. The double formation would not be complete until support was broken.

Support was broken in Mid June when the stock fell below 850, which was more than 12%

below support at 975. Stock sharply fell down to 675 and also negative divergence ofMACD (black line) with crossover of MACD line (Pink Oval & Circle) indicated the intense

selling pressure in the stock.

After this sharp drop, there was an equally sharp advance back above the newfoundresistance level. The advance to 975 in mid September formed resistance at 975.Thus theprevious support of 975 had now become resistance level.

2. Head And Shoulder Top:

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A Head and Shoulders reversal pattern forms after an uptrend, and its completion marks atrend 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. Thereaction lows of each peak can be connected to form support, or a neckline.

As its name implies, 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. We will look at each partindividually.

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Prior Trend: It is important to establish the existence of a prior uptrend for this to be a

reversal pattern.

Left Shoulder: 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 ensures to complete the formation ofthe shoulder (1). The low of the decline usually remains above the trend line, keeping the

uptrend intact.

Head: 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 (2). The low of the decline usually breaks the uptrend line.

Right Shoulder: 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.The decline from the peak of the right shoulder should break the neckline.

Neckline: 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.

Volume: As the Head and Shoulders pattern unfolds, volume plays an important role in

confirmation. Volume can be measured as an indicator (OBV, Chaikin Money Flow) or

simply by analyzing volume levels. Ideally, but not always, volume during the advance of

the left shoulder should be higher than during the advance of the head. This decrease in

volume and the new high of the head, together, serve as a warning sign. The next warning

sign comes when volume increases on the decline from the peak of the head. Final

confirmation comes when volume further increases during the decline of the right shoulder.

Neckline Break: The head and shoulders pattern is not complete and the uptrend is not

reversed until neckline support is broken. Ideally, this should also occur in a convincing

manner, with an expansion in volume.

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Support Turned Resistance: 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.

Price Target: After breaking neckline support, the projected price decline is found bymeasuring the distance from the neckline to the top of the head. This distance is thensubtracted from the neckline to reach a price target. Any price target should serve as arough guide, and other factors should be considered as well.

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Wockhardt Limited formed a Head and Shoulder reversal with a straight neckline. Keypoints are as follows:

1. The low at 480 marked the end of the left shoulder and the beginning of the head1

2. During the advance to 560, volume was still high, but not as high as during the left

shoulder advance. However, during the next advance to 545, volume tapered off

significantly.

3. Volume continued to decline until the breaking of the neckline. (Note red line on

volume bars.)

4. The decline from 560 to 480 formed the second low point (2).

5. During the decline of the right shoulder and neckline break, volume expanded (red

oval), and MACD formed negative divergence.

6. After the initial decline, there was a return to the neckline break (black arrow). Evenduring this decline, MACD remained in negative divergence and RSI showed level of

less than 30 i.e. stock was oversold. The subsequent decline took the stock below 360.

7. The measurement from neckline to the top of the head was 80 (marked with red line

and number-3). With the neckline break at 480, this would imply a move to around 400.

The Mid May low was 400(long black candlestick).

The head and shoulders pattern is one of the most common reversal formations. It is

important to remember that it occurs after an uptrend and usually marks a major trend

reversal when complete. While it is preferable that the left and right shoulders besymmetrical, it is not an absolute requirement. They can be different widths as well as

different heights.

Identification of neckline support and volume confirmation on the break can be the most

critical factors. The support break indicates a new willingness to sell at lower prices.

Lower prices combined with an increase in volume indicate an increase in supply.

Measuring the expected length of the decline after the breakout can be helpful, but it may

not be the exact target.

3. Head And Shoulder Bottom:

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The Head and Shoulders bottom is also known as an Inverse Head and Shoulders. It reliesmore heavily on volume patterns for confirmation.

The Head and Shoulders Bottom forms after a downtrend. The pattern contains threesuccessive troughs with the middle trough (head) being the deepest and the two outsidetroughs (shoulders) being shallower. The two shoulders would be equal in height. Thereaction highs in the middle of the pattern can be connected to form resistance, or aneckline.

The price action forming both Head and Shoulders Top and Head and Shoulders Bottompatterns remains the same, but reversed. The difference between two of them is Volume.Volume plays a larger role in bottom formations than top formations. While an increase involume on the neckline breakout for a Head and Shoulders Top is absolutely required for abottom.

Prior Trend: 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 ShouldersBottom formation.

Left Shoulder: 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).

Head: 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).

Right Shoulder: 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. Sometimes 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.

Neckline: 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. The neckline can slope up, slope down, or

be horizontal. An upward slope is more bullish than downward slope.

Volume: Volume plays a crucial role in the Head and Shoulders Bottom. Without the proper

expansion of volume, the validity of any breakout becomes suspect.

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Volume on the decline of the left shoulder is usually heavy and selling pressure quite

intense. The intensity of selling can even continue during the decline that forms the low of

the head. After this low, volume patterns should be watched carefully to look for expansion

during the advances.

The advance from the low of the head should show an increase in volume and/or better

indicator readings, e.g., CMF > 0 or rise in OBV. With light volume on the pullback,

indicators like CMF and OBV should remain strong. The most important moment for

volume occurs on the advance from the low of the right shoulder. For a breakout to be

considered valid, there needs to be an expansion of volume on the advance and during the

breakout.

1. Neckline Break: The Head and Shoulders Bottom pattern is not complete until

neckline resistance is broken. A neckline break should occur with an expansion of

volume.

2. Resistance Turned Support: Once resistance is broken, same resistance level to

turn into support.3. Price Target: After breaking neckline resistance, the projected advance is found bymeasuring the distance from the neckline to the bottom of the head. This distance isadded to the neckline to reach a price target.

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1. The stock began a downtrend in early July, and declined from 60 to 26.

2. The low of the left shoulder formed with a large spike in volume on a sharp down

day (red arrows).

3. The reaction rally at around 42 1/2 formed the first point of the neckline (1).

Volume on the advance was respectable with many gray bars exceeding the 60-day

SMA.

4. Chaikin Money Flow was mostly positive when the lows around 26 were forming in

formation of Head.

5. The advance from the low saw a large expansion of volume (green oval) and gap

up. The strength behind the move indicated that a significant low formed.

6. After the reaction high around 39, the second point of the neckline could be drawn

(2).

7. The decline from 39 to 33 occurred on light volume until the final two days, when

volume reached its highest point in a month. Also notice how trend line resistance near

35 became support around 33 on the price chart.

8. The advance from the low of the right shoulder occurred with above average

volume. Chaikin Money Flow was at its highest levels, and surpassed +20% shortly after

neckline resistance was broken.

After breaking neckline resistance, the stock returned to its new support.

4. Falling Wedge:

The falling wedge is a bullish pattern that begins wide at the top and contracts as pricesmove lower. This price action forms a cone that slopes down as the reaction highs andreaction lows converge. The falling wedges slope down and have a bullish bias. Thisbullish bias cannot be realized until a resistancebreakout.

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

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Prior Trend: 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. The pattern

usually forms over a 3-6 month period and the preceding downtrend should be at least 3months old.

Upper Resistance Line: 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.

Lower Support Line: At least two reaction lows are required to form the lower support

line. Each reaction low should be lower than the previous lows.

Contraction: The upper resistance line and lower support line converge to form a cone as

the pattern matures. Shallower lows indicate a decrease in selling pressure and create a

lower support line with less negative slope than the upper resistance line.

Resistance Break: Bullish confirmation of the pattern does not come until the resistance

line is broken. It is better to wait for a break above the previous reaction high for further

confirmation.

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Volume: Volume is an essential ingredient to confirm a falling wedge breakout. Without

an expansion of volume, the breakout will lack confirmation and it can lead to failure.

When lower highs and lower lows form, as in a falling wedge, a security remains in a

downtrend. The falling wedge is designed to indicate a decrease in downside momentum.Even though selling pressure may be diminishing, demand does not win out until resistance

is broken. It is important to wait for a breakout and combine other aspects of technical

analysis to confirm signals.

Orchid Chemicals And Pharmaceuticals Limited showed example of a falling wedge atthe end of a downtrend.

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Prior Trend: The downtrend for Orchid Chemical began in August of 2003.

Upper Resistance Line: The upper resistance line formed with three successively

lower peaks.

Lower Support Line: The lower support line formed with four successive lower

lows.

Contraction: The upper resistance line and lower support line converged as the

pattern matured. Even though each low is lower than the previous low, these lows

are only slightly lower. The shallowness of the new lows indicates that demand is

stepping almost immediately after a new low is recorded. The slope of the upper

resistance line is more negative than the lower support line.

Resistance Break: In contrast to the two previous lows, the mid July-2004 low was

flat and consolidated just between 110 and 125 for a week. The subsequent breakout

(pink vertical line) in Mid August occurred with a series of strong advances. In

addition, there was a positive divergence in the PPO (Black Line) and also a

crossover of PPO line (Blue Circle)

Volume: In Mid Deccember-2003, there is a good amount of volume at the start of

formation of the pattern. But gradually it decreased. Average volume was there

during these five months of pattern. In Mid August-2004 volume expanded (green

circle and red arrow) significantly and the stock broke trend line resistance.

ChaikinMoney flows confirmed the strength by surpassing their positive increment

and also Moving averages crossover confirmed the breakout of resistance level.

After the trend line breakout, the stock advanced significantly and then it consolidated forabout a week.

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5. Rising Wedge:

The rising wedge is a bearish pattern that begins wide at the bottom and contracts as pricesmove higher and the trading range narrows. The rising wedges definitely slope up and havea bearish bias.

The pattern can also fit into the continuation category. As a continuation pattern, the risingwedge will still slope up, but the slope will be against the prevailing downtrend. As areversal pattern, the rising wedge will slope up and with the prevailing trend. Regardless ofthe type (reversal or continuation), rising wedges are bearish.

Key Points to be considered:

Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse.

The rising wedge usually forms over a 3-6 month period and can mark an intermediate or

long-term trend reversal. Sometimes the current trend is totally contained within the rising

wedge; other times the pattern will form after an extended advance.

Upper Resistance Line: 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.

Lower Support Line: At least two reaction lows are required to form the lower support

line. Each reaction low should be higher than the previous low.

Contraction: The upper resistance line and lower support line converge as the patternmatures. 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 deceases as

prices increase.

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Support Break: 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.

Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansionof volume on the support line break can taken as bearish confirmation.

While the rising wedge 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 bullish. The final break of support indicates that the forces of

supply have finally won out and prices will be lower. 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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Wyeth Limited provides a good example of the rising wedge as a reversal pattern that formsin the face of weakening momentum and money flow.

Prior Trend: From a low around 340 in May-2005, Wyeth surpassed 800 in less

than 9 months. The final leg up was a sharp advance from below 550 in November-2006.

to 775 in February-2006.

Upper Resistance Line: The upper resistance line formed with three successively

higher peaks.

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Lower Support Line: The lower support line formed with three successive higher

lows.

Contraction: The upper resistance line and lower support line converged as the

pattern matured. A visual assessment confirms that the slope of the lower support line is

steeper than that of the upper resistance line.

Support Break: The support was broken with a long black candlestick. The

previous reaction low was broken a few days later with long black candlestick (red

arrow).

Volume: Chaikin Money Flow turned negative in mid February and was around

-5% when the support line was broken. There was an expansion of volume when the

previous reaction low was broken.

Support from the January reaction low around 790 turned into resistance and the stock tested

this level in March-2006 before declining further.

6. Rounding Bottom:

The rounding bottom is a long-term reversal pattern that is best suited for weekly charts. Itis also referred to as a saucer bottom, and represents a long consolidation period that turnsfrom a bearish bias to a bullish bias.

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Prior Trend: 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. In practice, there areoccasions when the low is recorded many months earlier and the security trades flat before

forming the pattern. When the rounding bottom does finally form, its low may not be the

lowest low of the last few months.

Decline: 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 different manner.

Low: The low of the rounding bottom can resemble a "V' bottom, but should not be toosharp and should take a few weeks to form. Because prices are in a long-term decline, the

possibility of a selling climax exists that could create a lower spike.

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Advance: 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.

Breakout: Bullish confirmation comes when the pattern breaks above the reaction high thatmarked the beginning of the decline at the start of the pattern. As with most resistance

breakouts, this level can becomesupport.

Volume: 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.

A rounding bottom could be thought of as a head and shoulders bottom without readilyidentifiable 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.

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JB Chemicals and Pharmaceuticals provides an example of a rounding bottom thatformed a

Interface Brokerage and Research Ltd.

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Transcript of Interface Brokerage and Research Ltd.