The discipline of "technical analysis" or "charting", as it is sometimes called, consists of studying chart patterns with a view to establishing patterns that can be used to improve prediction of future price movements. This subject can be broken into three areas:
- Line Charts
- Wave and cycle theories
There are many different types of formations which occur commonly in financial charts. For example, double tops and double bottoms usually signal a change in the direction of the trend. The head-and-shoulders formation and its opposite, the reverse head-and-shoulders formation usually indicate respectively a protracted downward or upward move. To get a clearer understanding of the various formations and how to interpret them you should refer to the module on formations in the course material.
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