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Keep in mind that these concepts are time-frame independent, meaning they work equally well on intraday, daily, weeklyand monthly time-frame charts, making them excellent supportive tools for traders, market timers, and long-term investors. Base breakouts often trigger big gaps on high volume that stay unfilled for a long time, forcing longs to enter positions within a high consolidation pattern rather than a pullback that tests new support. This happens because market insiders take notice of the developing uptrend and use their special skills to shake out weak hands and late adaptors. Late-stage downtrends can turn into wars of attrition, with participants moving on to other opportunities.
Stan Weinstein's stage analysis offers market participants a powerful tool to identify current market conditions and to make rapid adjustments to strategies and risk-management practices.Each of these stages generates a variety of trading and investment opportunities that capitalize on current conditions.
The middle of Stage 2 often prints a high-volume continuation gap that marks the halfway point of the uptrend. When it happens, the pullback trade offers outstanding reward:riskbecause the transition into the second stage tends to work with reliability, with few failed breakouts, allowing tightly placed stops. An ascending triangle is a chart pattern used in technical analysis created by a horizontal and rising trendline. However, high volatility also forces securities to fall far more rapidly than they rose, allowing perfectly timed short positions to book windfall profits. A brief education on Weinstein's principle lowers the risk associated with this myopia, enabling traders to make informed decisions when markets turn against their positions, as they do during ranges, correctionsand downtrends.Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. During this stage, there will usually be several swings between support at the bottom of the trading range and resistance at the top of the range.
The stage often begins on high volatility but ends on low volatility because apathy and disinterest have taken their toll, dropping the security's volume to cyclical lows. These include white papers, government data, original reporting, and interviews with industry experts. However, there's no perfect time frame for the completion of a top, making it easy to get caught in poor reward-risk scenarios, especially with short sales looking to profit from a breakdown. Intermediate moving averages start to align with key support levels, adding energy to the subsequent breakdown, which sets off a positive feedback loop. Legitimate topping patterns show active distribution because strong hands are taking profits and moving back to the sidelines.The opinions of Financial Sense® contributors do not necessarily reflect those of Financial Sense, staff, or parent company, Financial Sense® Wealth Management. Disillusionment and loss of faith characterize this uncomfortable period, which can take a long time to work through the system. Even so, tops display similar characteristics that let traders and market timers make informed judgments about the security's direction. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site.
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