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Gianni Di Poce On Chart Patterns You Should Know

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Gianni Di Poce On Chart Patterns You Should Know

Chart expert Gianni Di Poce wants traders to be able to identify and understand chart patterns for many reasons.

One that he highlighted during Benzinga's recent Stocks & Options 101 Boot Camp: "there are no coincidences in nature."

The Importance Of Charts: Technical analysis and chart pros better manage their money and spot opportunities ahead of time, Di Poce said.

Typically, traders should be able to recognize three chart patterns, he said:

  • Reversals.
  • Continuation. 
  • Momentum. 

Reversal Patterns: The four main chart patterns that indicate a potential reversal in the stock are as follows, Di Poce told the Benzinga Boot Camp:

  • Head-and-shoulders/inverted head-and-shoulders.
  • Falling/rising wedge.
  • Rounding bottom/top.
  • Double or triple bottoms/tops.

So what are the real-life uses for a reversal pattern? In the event that a trader recognizes a falling wedge, they could reasonably conclude the "downtrend is on the precipice of ending," Di Poce said.

This could mark the beginning of a new uptrend, and traders may want to wait for a pickup in volume for further confirmation, he said. 

Continuation Patterns: Five main chart patterns indicate that recent price action is likely to continue, Di Poce said:

  • Ascending triangle.
  • Descending triangle.
  • Symmetrical triangle.
  • Rectangle.
  • Ascending/descending price channels.

"We have to think of markets as cyclical entities — that is, volatility will compress before it expands and then it will compress after it expands, because it is up-down-up-down," he said. 

Momentum Patterns: Di Poce named six chart patterns that suggest a stock could begin seeing momentum in one direction: 

  • Bread and butter.
  • Saucer pattern.
  • Broadening wedge.
  • Cup and handle.
  • Bull flag. 
  • Rectangle.

Identifying and trading off momentum patterns is particularly important for anyone who wants to generate superior returns, he said.

"If you want to outperform the benchmark, you have to be invested in the strongest sectors and then subsequently the strongest names within the sector."

 

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