Chart Patterns | Head and Shoulders

Global Market Astro explains the common chart patterns observed in the market charts and the cause & effects of the various chart patterns.

DEFINING CHART PATTERNS

A chart pattern is a distinctive formation on a stock chart that indicates a trading signal, or future price movements of the stock. Chartists use the chart patterns to recognise current market trends and trend reversals and to identify buy and sell signals.
There are two types of chart patterns within this area of technical analysis. The reversal and continuation. A reversal pattern indicates that a prior trend will reverse once the pattern gets completed. A continuation pattern indicates that a trend will continue upon completion of the pattern. These chart patterns can be commonly found in charts of any timeframe.

HEAD AND SHOULDERS

“Head and Shoulders” is the most common and reliable chart pattern. It is a reversal chart pattern when formed indicates that the stock is about to move against the previous trend. The Head and shoulders pattern comprises of four main components- two shoulders, one head and one neckline. Each head and shoulder comprises of a high and a low.

There are two types of Head and Shoulders chart patterns,

Top Head and Shoulders in first image formed at the high of an uptrend indicate the end of the upward trend.

The bottom Head and Shoulders or Inverse Head and Shoulders signals a reversal in a downward trend.

100% EQUITIES STRATEGY

This blog article of Global Market Astro explains the term “100% Equities Strategy” commonly used in Portfolio management.

100% EQUITIES STRATEGY-EXPLAINED

This is an investment strategy used in the portfolio of an individual or pooled fund like mutual funds, etc. This strategy only considers equity securities for the investments. The equities may be the stocks listed in stock exchanges or OTC over the counter stocks or even private equity shares.

Generally equities are considered as the risky asset class compared to other investment arenas, but the historical returns from equities are higher as well. Hence a well-diversified portfolio containing all stocks can minimize the individual company risk and even sector related risks. Hence the Mutual funds or ETFs mention “100% Equities Strategy” on their prospectus in order to inform the investors regarding the fund’s overall risk profile.

Source : https://www.globalmarketastro.com/blog/equities-strategy

Adaptive Price Zone Technical Indicator

In this blog Global Market Astro has elaborated about the technical indicator used commonly in non-potential markets, Adaptive Price Zone(APZ) in simpler vocabulary.

ADAPTIVE PRICE ZONE

Adaptive Price Zone (APZ) was developed by Lee Leibfarth. It is volatility based technical indicator which appears like a set of bands on a price chart. It is highly helpful in choppy and in non-potential markets. Adaptive Price Zone is a technical indicator that aids investors in identifying the possible market turning points in upcoming future.

CALCULATION METHODOLOGY

This technical indicator indicates significant price movements by using a set of bands established on short-term, double-smoothed exponential moving average that reacts rapidly to price changes with reduced lag. The exponential moving average of one more exponential moving average (EMA) is utilized to create a fast-reacting average.

An exponential moving average gives more weightage, to the recent price data in a specified range of period whereas a simple moving average (SMA) gives equal weightage to all data in a specified range of period. EMA responds rapidly to current fluctuation of prices and to the changes in market conditions. The APZ uses the closing prices of a five-period EMA of another five-period EMA.

The adaptive component of the APZ's calculation comes from its use of an adaptive range to quantity volatility. This volatility value is attained by calculating the five-period EMA of five-period EMA of the current high minus the current low:

Volatility Value = Five-Period EMA of Five-Period EMA of (High – Low)

The volatility value is then multiplied by a deviation factor (for example, a deviation factor of two) to generate the upper and lower bands. The deviation factor will affect the distance that the bands appear from average price; higher deviation factors will cover price more loosely, lower deviation values will follow price more closely. Once the volatility value has been multiplied by a certain deviation factor, the volatility value is added to create the upper APZ band, and deducted to determine the lower APZ band:

Upper APZ Band = (Volatility Value * Deviation Factor) + Volatility Value

Lower APZ Band = (Volatility Value * Deviation Factor) – Volatility Value

The adaptive price zone (APZ) can be particularly useful in a market that keeps on moving sideward. This can help the day traders to make profits even in volatile markets by indicating price reversal points, which can indicate potentially profitable times to buy or sell. The APZ can be applied as part of an automated trading system.