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[צ'סלר] בשלביה האחרונים של המגמה ובתחילת היווצרותה של התבנית הטכנית הקלאסית, השוק מאופיין בתנודתיות יחסית גבוהה ושינויי כיוון חדים. לאחר שלב זה התנודתיות הולכת ונחלשת במקביל לפיתוח התבנית הטכנית, עד שמגיע שלב קריטי המסמן את "תחילת הסוף" של פיתוח התבנית. שלב סופי זה, ממש לפני הפריצה, מאופיין בירידה דרסטית בתנודתיות (יחסית לזו ששררה בתחילת פיתוח התבנית). המחיר כמעט ואינו זז ונראה כאילו עומד לפני הצתת פתיל הפריצה. ניתן להשתמש בכלים שונים כדי לאמוד שינויים בתנודתיות. אחד מהם הוא מתנד ה-ADX שפיתח וויילדר. מתנד זה מבוסס על ממוצע שיאים ושפלים בפרק זמן מוגדר (מומלץ לעשות שימוש ב-14 יחידות). ה-ADX יציב יותר בהשוואה לאומדני תנודתיות טהורים (יחידות סטייה למשל). למרות שה-ADX מופיע לרוב בספרות כמודד חוזק מגמתי, אין מניעה להשתמש בו למטרת אומדן תנודתיות. תנודתיות גבוהה תסומן בידי רמות ADX גבוהות (יש להתעלם מה-DI+, DI). תנודתיות נחלשת תסומן ע"י קו ADX יורד. סיום פיתוח התבנית (והצפי לפריצה) יסומן, בדרך-כלל, על-ידי ADX היורד אל מתחת לרמת 20 וסוגר ברמת 10.

Pattern Descriptions by Recognia
"Although there are commonly held "high-level" definitions for the key chart patterns, many experts have different opinions on their significance, importance, subtleties and trading implications. Recognia provides you with a balanced perspective from a number of published experts in the field of technical analysis, including Edwards and Magee, Bulkowski, Murphy and Schabacker. Recognia has also included the opinions of active traders that use patterns, such as Elaine Yager Director of Technical Analysis at Investec Ernst and Company in New York and a member of Recognia's Board of Advisors".
Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation, Lo, Mamaysky and Wang, 2000
"Certain technical patterns, when applied to many stocks over many time periods, do provide incremental information, especially for Nasdaq stocks. Although this does not necessarily imply that technical analysis can be used to generate "excess" trading profits, it does raise the possibility that technical analysis can add value to the investment process".
Pattern Matching in Financial Time Series Data, Xianping Ge, 1998
"We de ne a novel criterion of pattern similarity in nancial time series data. This criterion is robust, and concurs with human intuition".
Top and Bottom Patterns
The Anatomy Of Tops, Desmond, 2006
An exploration of the nature of bull market tops. Study of 14 peaks shows they don't come out of the blue. Major market tops are not the same as major market bottoms. A 2002 Lowry study titled Identifying Bear Market Bottoms and New Bull Markets showed that major market bottoms can often be identified by evidence of panic selling (one or more 90% Downside Days) in which investors dump stocks with abandon. Then, with the desire to sell having been exhausted, buyers suddenly rush in to snap up the bargains (and cover short positions), resulting in a 90% Upside Day. The combination of panic selling across a broad spectrum of stocks, followed quickly by broad, enthusiastic buying, produces what might be described as a classic “V” pattern of prices at major bear market bottoms. Bull market tops, on the other hand, tend to develop gradually over a long period of time. The reasons for this gradual process are easy to understand: It is the Law of Supply and Demand at work. Just as bull markets result from strong, persistent investor demand for stocks, bull market tops evolve when investors gradually stop buying. Some investors simply run out of new money to invest. Others begin to see individual stocks as being overvalued, and begin to hold back on new purchases. Whatever the reasons, the stock market cannot continue to advance without Demand exceeding Supply. The evolution of investor psychology from strong buying enthusiasm for stocks to passivity or complacency does not occur suddenly. Thus, bull market tops are commonly diffuse, possibly lulling most investors into inaction. There are several helpful tools that technical analysts have used for many decades to warn of impending stock market tops, such as the Advance-Decline Line and the number of stocks recording New 52-week Highs. History shows that these indicators often top out and begin to contract, as individual stocks fall by the wayside, months in advance of the final top in the Dow Jones Industrial Average. Therefore, it would not be a surprise to find that all stocks do not reach their peaks simultaneously or in unison with the DJIA. But, it is the degree and the intensity of the divergences of individual stocks from the DJIA that had never been measured before - until now.
Trade What you See, Not What you Hear, near the top
The news is usually always good at tops and volume is generally light on the initial part of the decline, so you must be alert for other clues.
All Declines Are Not Equal - Revisiting Three Price Patterns, Yamada, 2004
While prices may all head in a southern direction, what is important is where that decline began in the more structural price pattern of each individual stock. We seek to identify what the individual price patterns signify in the supply and demand factors underlying the decline. We have characterized declines in three distinct patterns.
Contrary Indicators, Ritholtz, 2003
This paper reviews the signals known as "contrary indicators" produced during the Bear market of 2000–2003. Using both quantitative data and qualitative events, we assess a variety of different indicators. We have determined that many of these were of enormous value to traders and investors. We attempt to answer the most frequently asked questions about Contrary Indicators: What are they? How do they work? What different kinds of indicators are there?
Christmas in August, Yamada, 2002
Technical analysis is well known for a lot of "exotic" patterns that develop based on the market forces of supply and demand. Over the last year, we've coined and added our own "Christmas Tree" pattern to the nomenclature. This pattern represents a parabolic advance and a slippery, equally dramatic, decline.The psychology of investing carries a desire to be bullish and we find that even after the severe 90% declines in individual technology stocks, investors are still asking if it’s "time to buy". Interestingly, the "Christmas Tree" pattern that is so prevalent today across the technology front is identical to what corresponding issues traced out, commencing in 1926.

Head and Shoulders

[Edwards and Magee] Classical technical criteria required for a "head-and-shoulders" bottom:
A: A decline, climaxing a more or less extensive downtrend, on which trading volume increases notably, followed by a minor recovery on which volume runs less than it did during the days of final decline and at the bottom. This is the "left shoulder".
B: Another decline which carries prices below the bottom of the left shoulder, on which activity shows some increase (compared with the preceding recovery) but usually does not equal the rate attained on the left shoulder decline, followed by another recovery which carries above the bottom level of the left shoulder and on which activity may pick up, at any rate exceed that on the recovery from the left shoulder. This is the "head".
C: A third decline on decidedly less volume than accompanied the making of either left shoulder or head, which fails to reach the low level of the head before another rally starts. This is the "right shoulder".
D: Finally, an advance on which activity increases notably, which pushes up through the neckline and closes above it by an amount approximately equivalent to 3% of the stock's market price, with a conspicuous burst of activity attending this penetration. This is the "confirmation" or "breakout".

Head and Shoulder: Not Just a Flaky Pattern, Osler and Chang, 1995
"This paper evaluates rigorously the predictive power of the head-and-shoulders pattern. Though such visual, nonlinear chart patterns are applied frequently by technical analysts, our paper is one of the first to evaluate the predictive power of such patterns".
Identifying Noise Traders: The Head-and-Shoulders Pattern In U.S. Equities, Osler, 1998
"This paper identifies a specific set of agents as noise traders in U.S. equity markets, and examines their effects on returns. These agents, who speculate using the "head-and-shoulders" chart pattern, are shown to qualify as noise traders because (1) trading volume is exceptionally high when they are active, and (2) their trading is unprofitable".
Microstructural Benefits of Imperfectly Rational Trading: the Head-and-Shoulders Pattern, Chu and Osler, 2004
"This paper provides evidence of imperfectly rational trading in U.S. equity markets, and shows that such trading brings microstructural benefits in the form of narrower bid-ask spreads. Focusing on the "head-and-shoulders" chart pattern, the paper presents three principal results. First, trading based on the pattern is imperfectly rational because it is not profitable. Second, the pattern has stimulated substantial and undiminished trading for forty years, despite its consistent lack of profitability. Third, spreads narrow significantly when head-and-shoulders trading appears to be active. The well-documented psychological phenomenon of "illusory correlations" may explain the continued use of this unprofitable pattern".
Are Technical Trading Rules Profitable? Evidence for Head-and-Shoulder Rules, Lucke
"This paper focuses on the prominent head-and-shoulder pattern as a representative trading rule which incorporates various "technical" ideas such as smoothed trends, trend reversal, resistance levels, and volatility clustering. For various combinations of the building blocks of head-and-shoulder definitions the result is generally negative: Returns to head-and-shoulder trading rules are not significantly positive".
Triangles

[Shaw] Primarily continuation patterns, the three types of triangles that are most often found are the symmetrical, the ascending and the descending. Two of the triangle patterns have some predictive value: namely, the ascending and the descending. These two configurations reveal a positive force of market action versus a neutral force. The ascending triangle, for example, illustrates a positive force of buying (higher lows) versus the neutral force of selling (the flat top). In most cases, the positive force will eventually win out, indicating that the ascending triangle is a consolidation phase most often found in an uptrend. Conversely, the descending triangle has the same qualifications: an aggressive force of selling (the descending highs) against a neutral force of buying (the flat bottoms). The descending version is, therefore, most often found within a major downtrend. The symmetrical triangle, as illustrated, is made up of two positive forces - the buying side (the ascending bottoms) and the selling side (the descending tops). Although such a triangle is often completed with a move in the direction from which the stock came, there have been many times when a symmetrical triangle has also been a reversal pattern. By using trendlines and following closely a stock's movement within the neutral trend, a hint is often given as to the possible direction of the impending move. Volume trends and relative strength analysis can often be additional aids toward determining the eventual direction of the breakout.

Descending Triangles
The classic Descending Triangle illustrates the painful rollover from bull to bear market better than any other pattern
Wedges, Flags and Pennants

[Shaw] Aside from the triangles, there are number of other technical configurations that qualify as consolidation patterns. In particular, there is a pattern called the Wedge and then there are two short-term configurations that go by the names of Flag and Pennant. The Wedge, as a consolidation configuration is somewhat similar to the triangular variety except that the trendlines move in the same direction. the Falling Wedge usually occurs in a major uptrend pattern. The slope of the trendlines indicates that the sellers may be aggressive but the buyers are relatively less timid. This is indicated by the fact that the slope of the underlying trendline is not as great as the slope of the overhead downtrend line. In addition, as this short-term phase of profit-taking occurs, volume usually shows a marked decrease. The Flag and Pennant formations are very short term in nature and indicative of a spritely market for the stock under observation. This patterns will most often occur early in an upward or downward trend. Most often, it is an illustration of short-term consolidation before a resumption of the underlying trend.

Market timing: a test of a charting heuristic, LEIGH, PAZ and PURVIS
"We implement a graphical (or ‘charting’) heuristic, the ‘bull flag’, which accepts a particular pattern of historical prices as a signal for a future market price increase, test it with several years of New York Stock Exchange Composite Index history, and find positive results. The results support the validity of technical analysis for stock market price prediction and fail to confirm the efficient markets hypothesis".
Stock market trading rule discovery using technical charting heuristics, LEIGH et al., 2002
bull flag, NYSE Composite Index
"Out-of-sample results indicate that these rules are effective".
Three Peaks and the Domed House

Three Peaks and the Domed House - Revisited, Leib, 2000
In 1968, George Lindsay, a master technical analyst, published an article in which he outlined a repetitive chart pattern that he had specifically found at the end of long sustained bull markets. He called his pattern "Three Peaks and a Domed House", and used it to predict a peak in the DJIA for October 31, 1968 or a little later. Lindsay spotted this idealized formation on several different occasions in the chart of the DJIA between 1906 and the early 1960's, some with small variations to the idealized pattern, but none with more significance than the point 23 high made on September 3, 1929.