Stock Market Patterns: Flags and Pennants
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Questions and Answers

What is the term for the pattern that marks the turning point between the bull and bear phases?

  • Accumulation pattern
  • Pennant pattern
  • Reversal pattern (correct)
  • Distribution pattern

    • What type of pattern is formed when the price hits a resistance level, breaks through it, hits a higher resistance level, and then hits the first resistance level again?

  • Accumulation pattern
  • Head-and-shoulders top (correct)
  • Head-and-shoulders bottom
  • Distribution pattern

    • What is the characteristic of volume during the formation of the left shoulder?

  • It is nonexistent
  • It is normally light
  • It is inconsistent
  • It is normally heaviest (correct)

    • What is the term for the pattern that forms when the security passes from weak, uninformed participants to strong, informed ones?

    <p>Accumulation pattern</p> Signup and view all the answers

    What is the term for the pattern that forms when the security is distributed from strong, informed participants to weak, uninformed ones?

    <p>Distribution pattern</p> Signup and view all the answers

    What is the primary difference between a head-and-shoulders top and a head-and-shoulders bottom?

    <p>The direction of the price movement</p> Signup and view all the answers

    What is the significance of the price pushing through line AA in Figure 8.6?

    <p>It confirms the reversal of a trend</p> Signup and view all the answers

    What is the purpose of analyzing volume characteristics in head-and-shoulders patterns?

    <p>To assess the validity of the pattern</p> Signup and view all the answers

    What is the relationship between the security and market participants in a distribution area?

    <p>The security is distributed from strong, informed participants to weak, uninformed ones</p> Signup and view all the answers

    What is the commonality between the formation of the left shoulder and the approach to the peak in head-and-shoulders patterns?

    <p>Heaviest volume activity</p> Signup and view all the answers

    What determines whether a pennant pattern is bullish or bearish?

    <p>The trend before the pennant began to form</p> Signup and view all the answers

    What is the characteristic of a pennant pattern in terms of its formation period?

    <p>It forms over a shorter period of time</p> Signup and view all the answers

    What type of pattern is a pennant?

    <p>Continuation pattern</p> Signup and view all the answers

    What is the difference between a pennant and a triangle?

    <p>Pennants form over shorter periods of time, while triangles form over longer periods of time</p> Signup and view all the answers

    What happens to the price of a stock as it forms a pennant?

    <p>It moves into a tighter and tighter consolidation range</p> Signup and view all the answers

    What is the symmetrical triangle?

    <p>A type of triangle</p> Signup and view all the answers

    What is the main characteristic of a triple top?

    <p>A bearish reversal pattern that forms as the price hits a resistance level three times</p> Signup and view all the answers

    What is the purpose of continuation patterns?

    <p>To provide an advanced warning when a stock price is likely to resume its trend</p> Signup and view all the answers

    What type of pattern is a flag?

    <p>A continuation pattern that forms as the price pulls back from the predominant trend in a parallel channel</p> Signup and view all the answers

    What is the main difference between a triple top and a triple bottom?

    <p>The direction of the trend before the pattern forms</p> Signup and view all the answers

    Which continuation pattern forms as the price moves in a triangle shape?

    <p>Pennant</p> Signup and view all the answers

    What is the main purpose of understanding chart patterns?

    <p>To put the odds of success in favor</p> Signup and view all the answers

    What is the primary purpose of analyzing volume characteristics in head-and-shoulders patterns?

    <p>To assess the validity of the pattern</p> Signup and view all the answers

    Which part of a head-and-shoulders pattern forms when the price hits a resistance level?

    <p>The left shoulder</p> Signup and view all the answers

    What happens to the price in a head-and-shoulders bottom pattern?

    <p>It breaks through the first support level and hits a lower support level</p> Signup and view all the answers

    What is characteristic of the activity during the formation of the left shoulder?

    <p>It is heaviest</p> Signup and view all the answers

    What is the relationship between the security and market participants in an accumulation pattern?

    <p>The security passes from weak, uninformed participants to strong, informed ones</p> Signup and view all the answers

    What is the significance of the price pushing through line AA in Figure 8.6?

    <p>It is a sign of a reversal pattern</p> Signup and view all the answers

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