Trading Central Technical
Learn more about the chart patterns covered
by our proprietary algorithms.
Technical Analysis and Technical Events
Technical Analysis is the practice of anticipating changes in a financial instrument’s price by finding patterns within it’s price history. It is the quantitative side of investment research, and both supports and complements other views, such as Fundamental Analysis, where investors use a company’s financial information such as earnings or debt to determine if it is an appropriate investment.
Coined by Trading Central, a Technical Event® signifies an important pattern or activity has occurred, such as the price crossing a critical line or threshold. Technical Events highlight price situations that may be worth considering in researching an investment activity. Technical Events can be used by investors to make more informed decisions about when to:
Technical Events covered
Trading Central’s patented pattern recognition is paired with the industry’s largest library of technical analysis including classic patterns, candlesticks, Elliott Wave and indicators like Bollinger Bands and MACD. This allows our flagship products such as Technical Insight to analyze virtually every publicly traded financial instrument including stocks, ETFs, indices, foreign exchange and futures.
Explore the different chart patterns we cover and their implications on an instruments price below:
Classic Chart Patterns
“Classic” is a term used to refer to a group of patterns that typically have a longer-term horizon (greater than 12 days) and which have distinct price swings such that the price swings form distinctive patterns. The names of classic patterns often reflect the shape of the formation such as the Double Top, Double Bottom, Head and Shoulders Top, Ascending Triangle and so on.
Ascending Continuation Triangle
Bottom Wedge / Triangle
Head and Shoulders Bottom
Symmetrical Continuation Triangle
A Continuation Wedge (Bearish) consists of two converging trend lines. The trend lines are slanted upward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted upwards at an angle. This is because prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows. A bearish signal occurs when prices break below the lower trendline. Over the weeks or months that this pattern forms the trend appears upwards but the long-term range is still downward.
Descending Continuation Triangle
Head and Shoulders Top
Symmetrical Continuation Triangle
Top Triangle – Top Wedge
Top Triangle – Top Wedge
Short-term Chart Patterns
Short-term patterns are based on the shape and relationship of the candlestick(s) or price bar(s) representing one or multiple consecutive trading days. This includes patterns such as the Hanging Man and the Gap Up. The technical event is the confirmation that the pattern has formed in the price bar(s). These Technical Event ® opportunities are useful for suggesting possible short-term price movement. They are also useful for supporting or refuting the possible price movement suggested by classic patterns. Short-term patterns are often considered as supplementary information.
Exhaustion Bars can develop after a rapid up or down move. They are a form of key reversal, but differ sufficiently enough to warrant their own category.
The Gravestone consists of a long Upper Shadow and no Real Body (that is the open is equal to the close for the session). There should be no Lower Shadow for a Gravestone.
The Hammer is characterized by a small Real Body near the top of the price range. The Real Body can be black or white, although a white candlestick is preferable. A white candlestick is slightly more bullish since it shows that the market sold off sharply during the session and then rebounded to close slightly above the opening price level. The Hammer has a long Lower Shadow and an Upper Shadow that is very small or non-existent.
An Inside Bar is a reversal formation characterized by a bar that forms totally within the trading range of the preceding bar. Inside Bars reflect a balance between buyers and sellers following a sharp up or down move, which is sometimes later resolved by a change in trend.
An Inverted Hammer forms when the Upper Shadow is longer than the Real Body and the Lower Shadow is small or non-existent. The Inverted Hammer is the same candlestick shape as a Shooting Star, although the Inverted Hammer marks the end/reversal of a downtrend, whereas the Shooting Star marks the end/reversal of an uptrend.
The Island Bottom occurs when the price “gaps” below a specific price range for a number of days and then is confirmed when the price “gaps” above the original range.
Key Reversal Bar
A Key Reversal Bar is one that develops after a prolonged rally or reaction. Often the trend will be accelerating by the time the price experiences the Key Reversal Bar.
Outside Bars exhibit a trading range that fully encompasses that of the previous bar. They can appear after both downtrends and uptrends, and are a strong signal of trend exhaustion leading to reversal.
Two Bar Reversal
A Two Bar Reversal is a classic signal of trend exhaustion. When these patterns occur after a pronounced advance or decline, the first bar should exhibit a dramatic continuation of the inbound trend, closing close to the bar’s extreme end. The second bar completely negates the first bar, with the open price on the second bar being close to the close of the first bar and the close of the second bar being close to the open of the first bar. Wider trading ranges on both bars denote a more climactic reversal in psychology.
Indicators that are currently supported are based on moving average calculations.
Double Moving Average Crossover
Price Crosses Moving Average
Triple Moving Average Crossover
Oscillators are based on mathematical formulas that incorporate historical or recent prices of the stock