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Decoding Contradicting Chart Patterns

People who follow my channel Trading Updates will remember when I said that we have a bearish and a bullish pattern unfolding on two different time frames. Which pattern unfolds will decide which way the market is going. The market has made the top for quite some time. According to Dow Theory also, the market does not keep on moving up. It has phases of uptrend, downtrend and sideways movements. It needs to accumulate or distribute before making any move.

On daily charts, Bank Nifty was forming a pattern better known as Three Black Crows which looks like this.

With the kind of daily trend that we witnessed after the Balakot Surgical Strikes, we have to be cautious in getting caught into a counter move. So going short just on the basis of a chart pattern does not make sense and one does need an extra confirmation which one can get from timing the entries on Lower Time Frames.

If one is ready to look on 30 minutes chart, then there were two more patterns unfolding. In the sideways movement, a symmetrical triangle was forming which was broken on 3rd May 2019 but at the same time a rising channel was also forming, top of which was somewhere near 30000.

For last two days, we kept on trying to enter the horizontal channel again or a kind of making a bottom reversal but when the Gap did not survive, I went short at 29750 and market crashed.

It is important to understand how Price Action work and just patterns don’t help. Tick by Tick watch of price action helps in getting a sense of where the price is going. For initiating a trade there are underlying position sizing and money management principals. Chart patterns alone never make profitable trades. Its combination of many things. They certainly give a starting point to a trader from where to start.

Stay tuned for more.

Rohit Katwal

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