Page 13 - Module 14 Pattern Formations

Module 14 – Pattern Formations

believed about price. This sudden imbalance between supply and demand always leads to a violent
move in price.
Generally, most issues will record a breakout (either higher or lower) about 2/3 through the pattern.
If a stock moved all the way to the apex of the triangle the initial breakout is almost always false and
should be avoided.

Because supply and demand are in equilibrium within the triangle, volume should slow dramatically.
Once a breakout has occurred, volume MUST increase significantly.
Upside breakouts often lead to small 2-3% rallies followed by an immediate test of the breakout
level. If the stock closes below this level (now support) for any reason the pattern becomes invalid.

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