The struggle of the two lions reaches the boiling point, and the coyote continues to wait. As a result, we have an Expanding Wedge - a combination of two differently directed lines 1-3 and 2-4. The starting point is the correctional low (point 2 of 1-2-3 pattern). The quotes go into consolidation, and the trader redraws the points in the chart. Buyers launch the attack, they test the high at point 3, however, their hopes will not come true either. If it occurs in a bullish market, then the inability of the bears to reverse the trend through the breakout of point 2 is the first sign of the strength of their opponents. Identification of the model begins with the appearance in the chart of the 1-2-3 pattern. I have used the techniques for improving it and trading strategies from my personal practice. This graphical configuration was developed by Thomas Bulkowski and first mentioned in the book Encyclopedia of Chart Patterns. The Expanding Wedge pattern on the basis of the 1-2-3 pattern will tell you how to do this. What you need to do is take the side of the winner. The emergence of several consecutive highs and lows simultaneously indicates an increase in volatility and blood fight for the initiative. If both opponents are strong, then, as a rule, this is expressed in the rewriting of extremums by the chart. Combination of Expanding Wedge and other patternsĬoyote Tactics: the Expanding Wedge will show the way.Coyote Tactics: the Expanding Wedge will show the way.The article covers the following subjects: Stand on the sideline and wait until the battle of lions is over. In this scenario, the best thing a trader can do is apply the Coyote tactics. Large fishes fight for the initiative, banks and investment companies give different estimates of the current situation, and the plankton rushes from side to side. It's different when the market consolidates. The crowd is trying hard to jump into one of the cars of the train leaving in a certain direction, analysts write the same typical forecasts, and any proposal to cross the road is perceived by the majority as dissent. Kindly consult your financial advisory before investing as it may result in a loss of capital.When a trend dominates the market, few doubt who controls the situation. Do leave your comments and valuable feedback below in the comments section.ĭISCLAIMER: This article is written purely for educational purpose and does not intend the disbursement of any trading or investment tip. We appreciate your interest in learning about the financial market. It also broke below previous support and the important zone of 30. This is called a ‘Negative Divergence’ which indicates the weakening of underlying upside momentum and is often a cause of worry. Post the breakout also, we saw the RSI tumbling very fast, thus emphasizing the weakness in the price of MARUTI’s stock. In the above chart we can see that the price of MARUTI had registered higher peaks consecutively, or ‘higher-highs’, however on the RSI indicator, lower consecutive peaks, or ‘lower-highs’, were seen forming. Other than the presence of the chart pattern, the momentum indicator, RSI had also hinted about the formation of a top. On the chart, we see that MARUTI has very well achieved this target level, taken support at the same, and bounced upward. The target level post such breakout is the base of the wedge, that is the length of the first wave, which in this case is ~677 points as marked by the violet price line. On the daily chart of MARUTI, the Rising Wedge pattern developed successfully, registering 5 contact points and finally breaking below the supporting line. A rising wedge can also occur in a downtrend, as a counter trend movement and ends up with again a downside breakout thereby resulting in a continuation of the main trend. If it appears after an uptrend, like in this case, it gives a downside breakout, thus ending in a reversal of the price trend. The Rising Wedge is predominantly a reversal pattern. Within the bounds a lot of activity is witnessed, with the prices bouncing off from the bounding lines several times before finally breaking out in a particular direction. The name of the pattern comes from the fact that both the upward bounding resistance trendline and the lower bounding support trendline are angled upwards and appear to be ‘Rising’. On the chart of MARUTI we see the formation of the ‘Rising Wedge’ pattern. If we look at the chart of MARUTI, we can see a clear indication of a topping out, which could have served a very good warning to the investors to exit before the the stock started bleeding red. The market in general has been falling since March 2015, however MARUTI started buckling only recently, from the end of December 2015.
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