A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots.
Types of price charts
There are three types of charts:
2 and 3 give more detailed information such as the open, close, low and high over a specific time frame.
Support and resistance
The support and resistance line/level is a certain level reaching which the price cannot fall or move higher, respectively. In any market with a stable trading range prices will meet resistance and support levels. In other words, when the price reaches a certain level, the bulls or bears begin aggressive buying or selling, because they do not agree to any level, and at some point supply and demand in the market are equal, thus forming resistance or support lines. However, if there is an upward or downward breakout of a trading range, the previous support level becomes the level of resistance (Fig. 4), and the level of resistance, on the contrary, becomes the level of support (Fig. 5).
In addition to trend lines, the low and high can serve as support and resistance levels (Fig. 6 and Fig.7). However, the previous high or low does not mean that it is the level from which the price will leap back. They tell us that when price moves close to them, it may meet the level of support or resistance near the low or high because the market remembers that there was parity between the bulls and bears at this level, and when the price is close to the level of support all start buying, and when approaching the level of resistance, on the contrary, start selling. A breakout of the previous minimum or maximum can be considered as a signal to further fall or increase in prices.
The criterion for a breakout of support and resistance levels can be a chain of 2-3 closures below or above these levels, respectively, as common breakout still did not mean anything (Fig.8). The above criterion is confirmation of a temporary duration. There are several approaches to definition of criteria: breakout depth, price values coming out of support or resistance levels.
Bars (Fig.9), candlesticks (Fig.10), the lows (Fig.11) and highs (Fig.12) can also serve as support or resistance lines.
Trend
Trend is an upward or downward tendency which is characterized by a strict consequence of higher maximums and minimums, in case of upward tendency, and lower minimums and maximums, in case of downward tendency. An uptrend is considered not to be broken till the previous high or low is not broken through. In other words, the next high or low is lower than the previous one. It is the necessary criterion for an upward tendency. A downtrend is considered not to be broken till the previous low or high is not broken through.
Trading range
Unlike a trend, a trading range represents a horizontal tendency in which a sequence of the highs and lows are almost in the same level. It also includes price fluctuations over long-lasted period of time. A trading range is considered to be broken if its upper or low boundary has been broken through. (Fig.15)
Mr Soros, the hedge fund manager best known as the man who broke the Bank of England” after he made a billion betting against the value of Sterling on Black Wednesday in 1992, said the China had created a “lopsided currency” system.
He criticised China for deliberately keeping the yuan - its currency - low in order to keep exports cheap, which is hurting US competitors.
Let’s look back to the market’s reaction to the Fed’s December 2008 statement that opened the door for QE 1.0.
Bernanke announced the Fed was considering QE on December 1,2008. EUR/USD closed at 1.2720 that day. The Fed announced officially that it would focus its future monetary policy on the size of the Fed’s balance sheet (IE buying assets or QE). EUR/USD closed at 1.4048 that day. It peaked at 1.4720 two days later.
After that, EUR/USD eased back to 1.2457 lows in early March before beginning to rise again. (The lows coincided with the release of the US bank stress tests). $1.7 bln of QE was announced at the March 18 meeting. EUR/USD jumped to from 1.30 to almost 1.35 that day and began a trend that ended in late November at 1.5145.
If we follow a similar pattern as last time, we should rally a few more days before retrenching into the November FOMC we a rally would resume, should history repeat itself.
Robert Prechter, president of Elliott Wave International, a newsletter publisher and data service in Gainesville, Ga., is a well-known bear. And perhaps unsurprisingly, he’s not been swayed by the recent rally in stocks. He appeared on Yahoo’s Tech Ticker Monday.
As The Journal’s Jason Zweig wrote back in July, Prechter predicted that the Dow would fall below 1000 within the next six years. Whoa. Zweig wrote:
Mr. Prechter is a technical analyst who studies the past price performance of the markets for clues to the future. He also believes that investors move in and out of the market on predictable waves of optimism and pessimism. “Because the mania [the bull markets of 1982 to 1999 and 2003 to 2007] was so terrific,” he told me this week, “it will be followed by a negative trend in social mood that will lead to a complete retracement.” That would put the Dow back to its levels in 1982, below 1000.
“In a deflationary environment, the last thing you want is to own any financial asset,” Mr. Prechter added. “If you stay out of stocks, real estate, gold and other commodities, which will all come down together, then you can preserve your purchasing power [in cash] for the next great buying opportunity.” He wouldn’t tell me what, if anything, he is selling short; he said only that he is “cash laden” with Treasury bills and Swiss money-market instruments.
But wouldn’t it be highly unusual for stocks to stagnate for 11 years and then collapse by 90%? “Definitely,” Mr. Prechter told me. “It’s very rare.” But, he points out, it is also very rare for the stock market to fall 50% and end up overvalued, as he says it is now. Still, he says, “I’m taking a big risk” making such a forecast.
Why is the Butterfly pattern important?
How do I find a Butterfly pattern?
Butterfly patterns are similar to Gartley patterns in that they resemble a skewed “W” or "M" shape on a price chart. However, a butterfly pattern completes at the convergence of 2 separate Fibonacci extension levels whereas the Gartley completes at the convergence of a Fibonacci retracement and extension.
The beauty of the butterfly lies in its symmetry between the two connecting triangles at point B. As with all geometric patterns, a buy or sell signal occurs as the pattern completes at point D.
Bullish Butterfly Pattern Rules (buy at point D)
1. Swing down from A-to-D is 127.2% or 161.8% extension of XA
a. D must be below X
3. Additional confirmation attained when time and price are in proportion
a. Time of XAB and BCD triangles ideally "equal," but BCD may fall within 61.8%-161.8%
4. Move beyond 161.8% negates the pattern
a. May indicate strong continuation move in progress
Bearish Butterfly Pattern Rules (sell at point D)
a. D must be above X
2. Valid ABCD must be observed in extension move (AD)
3. Additional confirmation attained when time and price are in proportion
a. Time of XAB and BCD triangles ideally "equal," but BCD may fall within 61.8%-161.8%
4. Move beyond 161.8% negates the pattern
a. May indicate strong continuation move