Pro-Patterns

The Pro-Patterns strategy is designed to trade the classic chart patterns and my favorite setups. At present, it identifies the Ascending Triangle pattern and Weekly Inside Bars pattern and takes trades accordingly.

1. Ascending Triangle patterns

Ascending triangles are bullish chart patterns that indicate accumulation. Usually, they form during an uptrend as continuation patterns. However, when formed during a downtrend, they can act as reversal patterns too. An Ascending Triangle pattern has two elements – a horizontal line and a rising trend line moving upwards. The horizontal line acts as the resistance which shows that the market has tried to break it multiple times, but it couldn’t. More the number of attempts, the higher the probability of profitable trading results on the breakout. The second element - the rising trend line - indicates higher lows which means that the sellers are not letting their position go at lower prices. 

More can be read on Investopedia website here.

How Ascending Triangle patterns are traded with Pro-Patterns strategy:

  • The strategy identifies ascending triangle patterns ranging from 40 to 120 days.

  • BUY signals are generated on the breakout of the flat horizontal line. No SHORT signal is generated on the breakdown of the rising trend line.

  • The importance is given to higher lows instead of attempting to make a perfectly straight rising trend line.

  • The strategy gives BUY signals on continuation as well as reversal patterns.

2. Weekly Inside Bars

An inside bar is formed when price trades within the high and low range of the previous candle, making the current candle an inside bar. Therefore, the inside bar is a two candlesticks price pattern. Inside bars often form following a strong move in a market, as it ‘pauses’ to consolidate before making its next move. However, they can act as reversal signals also.

In Pro-Patterns strategy, we trade three-candlesticks weekly inside bars. This means, that Weekly Inside Bars pattern is said to be formed when the current week's candle (candle C) is inside the previous week (candle B) and the previous week's candle (candle B) is inside the week prior to it (candle A) (see attached pic). This is further characterized by lower volumes on candles B and C.

How Weekly Inside Bars patterns are traded with Pro-Patterns strategy:

  • The strategy identifies inside bars on weekly charts with three candles.

  • A BUY or SHORT signal is generated next week on breakout or breakdown of high or low of candle C respectively.

  • The importance is given to a decrease in volume on candles B and C.

  • The strategy gives BUY or SHORT signals on continuation as well as reversal patterns.

3. Squeezes with Low ATR

This is not a typical chart pattern which you will find in theoretical textbooks. So instead of calling it a chart pattern, I prefer calling it a 'trade setup'.

 

In this setup, a stock halts for some days with one of the lowest ATR in the last few months, before giving a big movement. I use this setup only for my Long trades.

This setup gives me one of the highest risk-reward trades in a short duration of time. The frequency of this setup is not as high as the Ascending Triangle patterns. At most, I trade this setup once or twice in a month.

How Squeezes with Low ATR setups are traded with Pro-Patterns strategy:

  • The strategy identifies the formation of 'Squeezes with Low ATR' setup and shows them in the form of blue/purple dots at the bottom of the chart.

  • One has to buy the stock on the breakout of its high price since the first blue/purple dot start to appear.

4. Investing at Support zones

No rocket science here! Just buying quality companies at the prices which have given them support historically. In other words, buying fundamentally sound proven companies at the prices where they have refused to fall further historically or the prices which used to be their resistance levels earlier but have now turned themselves into support zones.

This is a level at which the price of a stock does not fall down any further. I use higher timeframes to draw and identify these support levels.

How 'Investing at Support zones' stocks are traded with Pro-Patterns strategy:

  • The strategy identifies support levels and automatically draws horizontal lines on the chart.

  • I prefer to use weekly or monthly timeframes to identify these support zones.

Have a look at some screenshots below

How it works

Step 1 - Which stock to trade?

The strategy identifies patterns in making and shows them on the chart. The Weekly Inside Bars patterns are shown on the weekly timeframe while Ascending Triangle patterns and Squeezes with Low ATR setups are shown on the daily timeframe. A daily watchlist is sent to all subscribers on a Telegram channel to inform them of the stocks where patterns have developed. 

The system then guides you on the price level at which to enter the trade. 

Step 2 - Generation of Trade signals

The Ascending Triangle pattern strategy gives BUY signals once the price breakout and closes above the horizontal resistance line. The Weekly Inside Bars strategy gives BUY / SHORT signal on breakout of the third week's high/low. 

Subscribers are told to enter into the trade through a Telegram channel.

Step 3 - Exiting the Trade

The strategy will show an Exit signal if any of the below-mentioned events happens first:

  • If Stop Loss is hit; or

  • If user-defined exit rule based on the following is met:

    • Breakdown of lowest low of user-input days; or

    • Price closes below the user-input Average True Range.

The strategy guides the price at which to exit, once the BUY signal is generated.

Subscribers are also guided on the Telegram channel for the exits.

SEBI Registered Research Analyst

Registration Number: INH100007073

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