Page 151 - THE MARKET WHISPERER

THE MARKET WHISPERER 14 9

it’s highly probable that on the 51st, you’ll be able to do it yourself.
Note that so far we have learned when to enter, but not when to exit.

In a later chapter discussing trade methods, reversals will be discussed
further and we will round out information on money management, aka
when to sell.

Breakout and Breakdown Patterns

The function of breakout patterns, like reversal patterns, is to identify
the entry point on a stock which is about to make a sharp upward price
change. In contrast to reversal patterns, the breakout pattern is not meant
to identify the point of reversal, but continuation.

Breakout patterns operate better when the market is stronger and
volume is high. It is possible to trade in breakout patterns throughout the
trading day, but the best time to do so is during the first ninety minutes of
the trading session. Later, we will trade in intraday breakouts providing
they look particularly good or are based on the daily chart, and their
purpose is for a swing of several days’ length.

The reverse of breakout patterns is known as breakdown patterns.
Everything that has been said relative to stocks breaking out with an
upward movement is true for stocks breaking down in a downward
movement.

Breakout and breakdown patterns are based on psychological
formations of buyers and sellers, on fear and on greed. Every time you
identify a pattern, imagine the people currently holding the stock, or about
to exit it. Think about the mindset of long traders, short traders, and the
disappointment of those who did not succeed in buying or shorting, or
those who are currently, like you, trying to enter. By the time you reach
the stage where you “understand” the stock, the patterns will be well
assimilated in your mind.

Bull Flag