Page 160 - THE MARKET WHISPERER

158 PART 5 - Principles O f Technical Analysis

SMART Head and shoulders formations are “long range” formations
MONEY structured on multiple candles, and are therefore valid even
if they operate against the stock’s original trend.

Inverse Head and Shoulders, the Fuel Company – ATPG

ATPG drops sharply when the trading session opens, corrects upwards
and forms the left shoulder [1]. It then drops to a new low, but returns
to the area of resistance of the left shoulder, and in this way forms the
inverted head [2]. It corrects again and forms the right shoulder [3]. It
should now be fairly clear that the price is reversing direction. The right
shoulder [3] indicates that buyers are no longer panicked, compared to the
head [2], and that a breakout of the resistance line should lead to a high.

Pennant

A pennant formation can be bearish or bullish. In the pennant formation,

the price consolidates while moving in the form of a pennant, as seen in

the chart. You need to sketch the pennant in your imagination and then

wait for the exit beyond its boundaries, as we see in the chart.

The technical premise is that at the end of consolidation, at approximately
80% of the pennant’s expected range, a sharp shift in movement should
be executed. Usually the exit from the pennant follows the original trend,
in other words: if the stock showed an uptrend before its consolidation

in the pennant formation, it is reasonable to assume that the price will