TradingDay.com - Day Trading - After Hours Trading Home   After Hours Trading
Enter Ticker
Symbol
Symbol
Lookup
 

Topics

Swing Trading

Bilateral Trade Setups

Exploring Market Physics

Pattern Cycles:
Declines
Reversals
Tops
Highs
Trends
Breakouts
Bottoms

Scanning Tips and Techniques

The Profitable Trader

Trading Execution Zone

Trading with Stage Analysis

20 Golden Rules for Traders

20 Rules for Effective Trade Execution

20 Rules to Stop Losing Money

Bottoms & Tops

Adam & Eve & Adam

Adam & Eve Tops

Hell's Triangle

Lowdown on Bottoms

The Big W

Corrections

Anticipating a Selloff

5 Wave Declines

Selling Declines

Surviving Bear Markets

Common Pitfalls of Selling Short

Indicators

Bollinger Bands Tactics

Five Fibonacci Tricks

Fun with Fibonacci

Moving Average Crossovers

Overbought/Oversold Overload

Time Trading

Voodoo Trading

Market Dynamics

Clear Air

Cutting Losses

Effective Market Timing

Exit Strategies

Greed and Fear

Measuring Reward:Risk

Pattern Failure

Playing Failed Failures

Breakouts

Breakout Trading

Catch The Dow and Elliott Waves

False Breakouts and Whipsaws

Morning Gap Strategies

The Gap Primer

Trend, Direction and Timing

Trend Waves

Triangle Trading

Day Trading

3-D Trade Execution

Bid-Ask

Pullback Day Trading

Tale of the Tape

Tape Reading

New Highs

Mastering The Momentum Trade

Momentum Cycles

Uncharted Territory

TradingDay Domain
for Sale




 
TradingDay.com > Technical Analysis Tutorial

T e c h n i c a l   A n a l y s i s   T u t o r i a l
by Alan Farley

The Big W

Double Bottoms provide visual reference points that map the entire reversal process. Once located, these signposts identify most key price pivots and flash early warning signals when violated. The most common of these, The Big W, begins at the last major high printed by a downtrending stock, just prior to the first bottom. The first bounce after this low creates the center of the W as it retraces between 38% and 62% of that last downward move.

This rally fades and price descends back toward a test of the last bottom low. At this moment the trader listens closely for the first bell to ring. A wide range reversal bar (doji or hammer) may appear close to the low price of the last bottom. Or volume spikes sharply but price does not fail. Better yet, a Turtle Reversal develops where price violates the last low by a few ticks and then prints a sharp move back above support. Should any or all of these events occur, we mark the potential second leg on our Big W.

Trade entry can be initiated aggressively near the bottom of the second leg if the bells ring loudly. The top of the shorter move marking the partial retracement of the last downward impulse (middle of the W) now becomes our main pivot price for analysis and further trade entry. For price to successfully return to this point, it must retrace 100% of the last fall (from the second low). This finally breaks the lower high, lower low bear cycle. In strong DBs, price will quickly surge to this price right off the second bottom.

A less aggressive long position can be entered when this new impulse retraces strongly through 62% of the fall into the second low. However, if a short-term exit is desired, sufficient profit potential must exist between the entry and the pivot price for this trade to make sense. Longer-term traders can hold positions as price mounts this pivot. At this point, it will often pause to test support. However, another upward leg is then expected.

Price returning to the height of the middle of the Big W has a very high probability of surging beyond this point. Under normal conditions, it can easily retrace 100% of the original downward impulse, completing both the DB and Big W patterns. This tendency allows for further entry at the expected return test to the pivot point after the second surge has begun. The TIG chart provides an excellent example of this second chance opportunity.

TIG
In 1996, property-casualty carrier TIG Holdings charted a double bottom volatility ride uncommon in insurance stocks. As price emerged from a small but powerful Turtle Reversal, it faithfully completed a classic double bottom variation: the outline of the letter W.
 


Content provided by The Hard Right Edge




Enter Ticker
Symbol
Symbol
Lookup

TradingDay.com

Home   After Hours Trading   Rügen Ferienwohnungen  

Copyright © 2005 TradingDay.com All rights reserved.