MARTIN PRING ON PRICE PATTERNS

Martin J. Pring

Three Introductory Concepts:

1. Support and resistance
2. Peak and trough analysis
3. Trendline Analysis

A. SUPPORT AND RESISTANCE:

*How to identify
1. Previous High and lows
2. Round numbers
3. Dynamic support and resistance ( trendline, MA)
4. Emotional points ( GAPS )
5. Proportionate move, retracements (FIB)
*Significance of a Potential Support and Resistance:
1. Volume on support and resistance
2. Speed and extent of the previous move
3. Amount of time elapsed

B. TRENDLINE
*Trendline break can signal reversal or consolidation

*Significance of trendline
1. Length of line
2. Number of times the trendline has been touched or
approached
3. Angle of ascent and descent
* Sharp trend difficult to sustain and break of it
represents a continuation rather than reversal break
MEASURING IMPLICATIONS
*depth of pattern
VOLUME PRINCIPLES AS THEY APPLY TO PRICE PATTERNS
1. When price and volume patterns are compared, it is
important to see whether they are in agreement. If they are,
the probabilities favor an extension of the trend.
2. If price and volume disagree, this tells us that the
underlying trend is not as strong as it looks on the surface. If
the breakout from a price pattern develops with such
disagreement, a warning of potentially invalid signal is being
given.
3. Occasionally, price action offers mild signs of an impending
trend reversal, but volume can throw up characteristics of its
own that literally shout this message. In such case, a study
that was limited to price action would fail to uncover a really
good and obvious warning or opportunity.
 TRADITIONAL PATTERNS
RECTANGLE
RECTANGLE REVIEW:
1. PRICE: trading range bounded by two parallel trendlines.
2. VOLUME: shrinks as pattern is formed. Better if volume
expands on upside breakout.
3. MEASURING: depth of pattern
4. UPSIDE FAILURE: the price fall back into the pattern and
violates previous low,crosses below 50% and above
average volume on retest on pattern.
5. DOWNSIDE FAILURE: the price rises back into the pattern
and violates previous high ,crosses above 50%

HEAD AND SHOULDER

HEAD AND SHOULDER TOP REVIEW
1. PRICE: A final rally separated by two smaller rallies at
tops.
2. VOLUME: Very heavy volume on the left shoulder and
sometimes head. Low and shrinking volume on the right
shoulder rally, immaterial on breakdown, but heavy
volume preferred.
3. MEASURING: Depth
4. SIGNS OF FALSE BREAKOUT: Presence of second
retracement rally and failure to break the initial
breakdown low. A rally above the trendline joining the
head and right shoulder, provided it is not unduly steep
and /or above the right shoulder
A pattern may fail if:
1. Heavy volume on right shoulder of a potential head and
shoulders top. Light volume on a reverse head and
shoulder breakout.
 2. Failure of the overall market and other stocks in the
industry group to ac t in sympathy.
3. The relative strength line falling to confirm the breakout

DOUBLE TOPS, DOUBLE BOTTOMS AND

TRIPLE PATTERNS
Double top notes:
* Time separating two peaks. Daily TF, one week interval is
more likely to result in consolidation formation such as
rectangle
*The decline between the valleys is 15% to 20%
* Second valley signify failure, so dapat below or equal
pwede ding 3% rule
* kapag lumagpas yung second peak sa first peak pero
nagbreak below sa valley low or trough considered as
reversal double top.
* measuring objective cannot be applied

Double bottoms note:

*High volume on first low, lower volume on the second and
expanding volume on breakout.
* Second usually daw eh mas mataas ng konti or pwede ding
bumaba ng konti.
*preceded by sharp decline, the second bottom more of
inverse head and shoulder and rounded.

Chinese double bottom

* The price declines under the constraint of resistance
trendline. The longer the torture trendline the more bullish
the situation
*the steeper the trendline the more sharp yung magiging
akyat

Pano nga ba yung logic ng double bottom?

 *nagkaroon ng sharp price decline tapos nakahanap ng
support, so high volume tapos nagrally kasi may mga
impatient/huli sa balita na trader sabay naharang ng
resistance, after non retest ng previous low, retest dapat low
volume. Tapos sa breakout high volume.

Platform double bottom

*Variation of Chinese double bottom
* very sharp decline, panic selling sabay nagupward tapos
trading range.
*Stop point on bottom of platform
Whipsaw double bottom ( “lucky seven” double bottom)
*4 waves sa first bottom then sa second is 3
* best entry is yung 6 wave yun na yung retest ng HH ng
second bottom

TRIPLE TOPS
* MEASURING IMPLICATION: distance between peak (trough)
and lower end of pattern then projecting form neckline.
DOUBLE TOP REVIEW:
1. PRICE: Two highs following worthwhile rally that form at
approximately the same level. They are separated by a
decline and decent time interval.
2. PATTERN COMPLETED: With a decline below the valley
low.
3. VOLUME CONSIDERATION: Heavy volume on the first top.
Substantially low volume on the second
4. MEASURING IMPLICATION: The distance between the
higher of the two tops and valley low is projected down
from the breakout point.
5. SIGNS OF FALSE BREAKOUT: Retracement of 50% or more
of the distance between the second top and the breakout
point.
 6. PLACES TO UNWIND THE POSITION IN CASE OF WHIPSAW:
Retracement of the 50% or more of the distance between
the second top and the breakout point.

DOUBLE BOTTOM REVIEW:

1. PRICE: Two lows following a serious decline that form at
approximately the sam level. The two lows are separated
by a rally.
2. PATTERN COMPLETED: With move above the rally peak
coming off the initial low.
3. VOLUME CONSIDERATION: Heavy volume on the first
bottom; distinctly lower volume on the second. Very high
volume should accompany the upside breakout.
4. MEASURING IMPLICATION: The distance from the lower of
the two bottoms is projected up from the breakout point.
5. SIGNS OF FALSE BREAKOUTS: Retracement of 50% or
more of the distance from the second low to the breakout
point. Low volume accompanying the breakout.
6. PLACES TO UNWIND THE POSITION IN CASE OF A
WHIPSAW BREAKOUT: On decline that retraces more than
50% percent of the distance from the low to the breakout
point

TRIPLE TOP REVIEW:

1. PRICE: Following a worthwhile rally, three highs that

form at approximately the same level, where the
second is not higher than the two.
2. PATTERN COMPLETED: With a decline below a more
or less horizontal trendline joining the three lows.
3. VOLUME CONSIDERATION: Heavier volume on the
first two tops; substantially lower volume on the
 second. These characteristics are less precise than
those of other patterns.
4. MEASURING: The distance from the highest of the
three tops is projected from the breakout point.
5. SIGNS OF FALSE BREAKOUTS: Retracement of 50
percent or more of the distance between the third
top and breakout point. Violation of a worthwhile

TRIPLE- BOTTOM REVIEW:

1. PRICE: Following a decline, three lows that form at
approximately the same level where the second is
not lower than the two.
2. PATTERN COMPLETED: With a move above an
approximately horizontal trendline joining rally
peaks coming off the initial two lows.
3. VOLUME CONSIDERATIONS: Heavy volume on the
first bottom; very hihgh volume accompanying the
upside breakout point.
4. SIGNS OF FALSE BREAKOUT: Retracement of 50%
or more of the rally from the third low to the
brakeout point.
5. PLACES TO UNWIND POSITION INCASE OF
WHIPSAW: Retracement of 50 percent or more of
the distance from the final low to the breakout
point. Breakout accompanies by low volume.

AFTER NG UPTHRUST
NEXT BAR SHOULD BE:

1. VOLUME IS < THE VOLUME OF UPTHRUST BAR

2. COLOR IS IMMATERIAL
3. NO UPPER TAIL.

VWAP
POSSIBLE SUPPORT AFTER MARUBOZU