The amount of orders pending is a good gauge of how activethe economy is and how it might fare in the future. Similar reports about durablegoods orders, industrial production, capacity utilization, business inventories, andothers measure what is happening in the manufacturing sector and, in turn, whatmay happen to the job market and other areas.Employment Situation Nothing provides a better indication of how muchconsumers might purchase and how strong the economy is than how many peopleare working or how many people are unemployed. Monthly employment reportshave become a significant market mover in recent years as the economy adjusts totrends in outsourcing and downsizing.Consumer Price Index, Producer Price Index These indexes measureprice levels of various goods and services and generally are considered to be thebest gauges of the inflation rate, which often has a bearing on interest rates. Analysts examine components of these reports to see how current levels comparewith previous levels.Housing Starts, Home Sales Housing is a major factor in the economy,with the level of activity indicating how much money consumers have to spendand how much demand there will be for raw materials such as lumber or copper,appliances, and all the other items needed for building and maintaining a home.Another related report on construction spending provides similar informationabout building offices, shopping malls, and so forth. All of these statistics reflecthow people feel about the economy and its future and may have an influence oninterest rates.Balance of Payments Reports in this area deal with the level of a nation’s imports versus exports, commonly known as a trade deficit in the United States, andcash flows among nations. International trade figures provide a measure of economic conditions, and current account figures show how much money is movingfrom one country to another for investment purposes.Federal Open Market Committee Meetings and Fed Actions Anythingthe Federal Reserve Board does or even hints at doing is closely monitored bytraders because of the effect on short-term interest rates and the U.S. dollar andthe possible repercussions on other markets and the economy. The Fed, whichmeets about every six weeks, attempts to walk a tightrope between stimulatingand tightening spending by adjusting short-term interest rates and reserve lendingrequirements in an effort to maintain a stable economy. Fed meeting days can produce some volatile market movements.
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Agricultural CommoditiesThe U.S. Department of Agriculture (USDA) provides a number of reports on commodities produced in the United States as well as crops grown elsewhere in theworld. These reports on grains, soybeans, cotton, orange juice, and meats canhave a significant impact on the futures market prices for these commodities.Many of these reports affect all of these markets in a ripple effect—for example, the amount of grain produced or in storage will have a bearing on feed pricesthat, in turn, may affect how many animals are raised and prices at the meatcounter. Others cover only selected areas. Because of the seasonal nature of production and consumption, a report in one month may have a much bigger impactthan the same report in another month.Most of the major reports are so-called lockup reports—that is, they are compiled in a locked room and released to the whole world at the same instant. Thatmeans individual traders can have access to the information at the same time asthe largest trader.For a calendar of when these reports are scheduled to be released, go to theUSDA’s National Agriculture Statistical Service web site at www.nass.usda.gov/Publications/Reports_By_Date/ or to the sites of other USDA agencies such as theEconomic Research Service or the Foreign Agricultural Service. The USDA releases many other statistics and reports, but the following have the most impacton futures markets.Crop Production Not all crops are covered in each of these monthly reports,but these updates of production estimates released about the 10th of each monthoften set the tone of the market for the month ahead. Some reports are only projections, but other reports during the growing and harvesting season provide survey-based estimates of yields and the size of the U.S. crop.Prospective Plantings, Acreage These reports on spring-planted cropsindicate the acreage that farmers intend to plant (released at the end of March)and what they actually planted (released at the end of June). The June figuresmay be adjusted as officials get a better idea of the weather’s effect on planting,but they often serve as the base from which crop sizes are estimated during theupcoming season.Supply/Demand Estimates USDA officials release revised figures based onthe latest crop production report and other information each month, not only forU.S. crops but also for all other major crop-producing countries around the world,such as Brazil, Canada, Australia, and Europe. Total supply takes into account carryover from the previous season, new estimated production, and imports. Totaldemand is actually the expected consumption, either domestically for food, feed,or fuel or for exports. The remainder left over from supply minus usage is the newending stocks or carryover figure. A key number that traders watch is the endingstocks-to-usage ratio to see how it compares with previous years.
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Stocks in All Positions In addition to the year-end stocks figures, the USDAalso announces estimates for the amount of stocks on farms and off farms eachquarter. This provides an important measure of usage as the season progresses.Based on its surveys of stocks available, the USDA sometimes revises its production estimates long after the regular monthly reports have been released.Crop Progress, Crop Summary These are important weekly reports that update the condition of crops at the end of the previous week. During the plantingseason, these reports indicate how much of the crop has been planted, how muchhas emerged, and so on. Similar figures on the amount of the crop harvested arereleased during the harvesting season. The amount of the crop rated excellent,good, fair, and poor in each area of the major production regions during the growing season helps traders calculate what the outlook for the size of yields and production may be.Hogs and Pigs These quarterly reports (end of March, June, September, December) provide estimates of hog numbers by weight category, farrowing intentions, pigs per litter—in short, all the information traders need to calculate theamount and timing of pork production. Because production plans may change asprice or weather changes, actual slaughter figures may result in revisions to original numbers that surprise traders and cause volatile price action.Cattle on Feed These monthly reports provide estimates of the number of cattle in feedlots by weight category in the major production states. They do notcover all cattle slaughtered, but just those in states that serve as a bellwether forthe cattle futures market. Annual and semiannual summaries of all cattle numbersbreak down the U.S. herd by type (dairy or beef), breeding herd, calf crop, andother categories.Cold Storage Monthly cold storage reports indicate how many pounds of thevarious meats are in freezers. Although most meat moves into consumer handswithout going into storage, this report is important for a market such as porkbelly futures.
Softs or ExoticsAlthough still agricultural, commodities such as sugar, cocoa, and coffee are produced primarily in countries with warmer climates, and the United States and Europe are major importers of these commodities. The Foreign Agricultural Serviceof the USDA at www.fas.usda.gov does compile statistics and releases regular reports on these markets, which are traded at the New York Board of Trade and inLondon at Euronext.liffe.These commodities all have prominent international organizations made up ofboth producing and consuming nations, and all have headquarters in London. In
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addition to weather, which is always a key in commodity production, prices ofthese commodities tend to be more susceptible to social, political, and labor issues that may disrupt the flow of supplies. Traders need to especially monitorthese issues in the major producing and exporting countries:Sugar is produced in many areas from either sugar cane or sugar beets, makingfor a competitive world market sometimes protected by tariffs or import quotas.Brazil is a major exporter. For more information on sugar, see the InternationalSugar Organization web site at www.sugaronline.com/iso.Cocoa production is dominated by Côte d’Ivoire (Ivory Coast), Ghana, and Indonesia. For more information on cocoa, see the International Cocoa Organizationweb site at www.icco.org.The world’s largest exporters of coffee are Brazil, Vietnam, Indonesia, andColombia. For more details on coffee, see the web site of the International CoffeeOrganization at www.ico.org.
EnergyThe primary energy markets are crude oil and natural gas; the product markets areheating oil, unleaded gasoline, and propane. Futures contracts for all of thesemarkets are traded at the New York Mercantile Exchange and at the InternationalPetroleum Exchange in London, which both offer a number of information resources. Of the various grades of crude oil produced around the world, the leadersin futures trading are West Texas intermediate, which is traded in New York, andBrent crude, which is traded in London and Dublin.On the supply side, the dominant force in world energy markets is the Organization of Petroleum Exporting Countries (OPEC). On the demand side, trends ineconomic growth prospects have a major bearing on how much oil the worldneeds. OPEC attempts to set quotas for production that are low enough to maintain prices it deems adequate but not so low as to stifle global economies and,therefore, diminish future oil demand.In trying to maintain this tight supply/demand balance, energy markets are themost sensitive commodity market when it comes to political, labor, social, and economic issues, particularly in key production areas where supply disruptions may befelt almost immediately by importing countries. For this reason, weekly statistics ofU.S. stocks of crude oil and products provided by the American Petroleum Instituteat www.api.org and the Energy Information Agency of the Department of Energy atwww.eia.doe.gov often are market events driving energy prices.In addition to economic conditions, extreme weather is a major factor for natural gas prices. Because natural gas cannot easily be imported from overseas orstored, most of the supply moves via pipeline from the well to the consumer. Ifproduction is disrupted on the Gulf Coast during the hurricane season, or if unusually cold or hot weather increases demand for heating and air-conditioning, natural gas prices are likely to spike higher and then come down almost as fast whenthe situation passes.
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MetalsPrices for precious metals such as gold and platinum have less of a supply/demand impact than most commodities. Instead, prices tend to respond to thevalue of the U.S. dollar, prospects for inflation or deflation, geopolitical tensions, or other situations where investors turn to metals as a store of value inuncertain times. Gold prices have been affected at times by central bank sales,but the latest political developments may provide a better gauge of prices thanany supply/demand issue.By contrast, copper, palladium, and silver are nonprecious or industrial metalsthat do respond to supply/demand factors—silver has a dual role among the metals for both its industrial and monetary uses. Copper, in fact, has been called themetal with a Ph.D. in world economics because its price is so sensitive to globaleconomic conditions that play a big role in demand. Any report that deals witheconomic conditions, especially those related to housing, automobiles, appliances, and the like, may have an effect on prices for these metals. Silver is alsosensitive to developments in photography.All of these metals are traded on the COMEX division of the New York Mercantile Exchange and at several other exchanges around the world. Gold andsilver contracts were recently listed on electronically traded markets at theChicago Board of Trade. In addition to the exchanges, you can get informationabout metals from the International Wrought Copper Council at www.coppercouncil.org, the World Gold Council at www.gold.org, or the Silver Institute atwww.silverinstitute.org.With this introduction to fundamental analysis behind us, let’s now considerthe other major approach to analyzing markets—technical analysis.
TECHNICAL ANALYSIS HIGHLIGHTSSome call it voodoo, but it’s hard to argue with the widespread acceptance of technical analysis in the investment community. Technical analysis is the study of priceaction but also includes a number of statistical indicators, as well as data on volume, open interest, and other factors that relate to tracking prices.Technical analysis is considered to be both an art and a science. This chapterwill focus more on the science part of the story and will leave the art side for youto ponder from your own experiences.
Charts of All TypesFirst and foremost, technical analysis means charts, and traders use several different types of charts, each providing a different view of prices. Which chart type andwhich technical indicators you use often depends on a look and feel to which youhave become accustomed. Whatever you use, your chart should help you get some
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understanding of the market’s price history and how past price action may provideclues about how prices may unfold in the future.The following charts all cover about a four-month period of gold futuresprices. Note the information conveyed by each and see which type of chart is mosthelpful to you.Line Charts We’ll start first with the line chart, not because it is the most popular but simply because it provides the easiest explanation of basic chart construction. Figure 2.2 shows a basic line chart constructed by connecting just the closingprices for periods without regard to other values for those periods, such as highsor lows. As with any chart, the periods viewed could be daily, weekly, monthly, orany intraday period such as 60 minutes or 5 minutes.Media frequently used line charts in past years to present price action, perhapsbecause of their simple and uncluttered format. Line charts are still used today forpresenting single-value data, such as government statistics or supply/demand values. However, with the proliferation of charting software, most traders have come
FIGURE 2.2 Line chart. The closing value for each period is connected to the next,without regard to other values for that period, such as the high or low.(Source: eSignal, www.esignal.com)
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to expect more sophistication in the charts they view, even in free charts from newsand chart vendors. Accordingly, they have moved on to more complex charts readily available from a variety of sources.Bar Charts Bar charts include quite a bit more information than line chartswith only a moderate increase in the complexity or “busyness” of the chart. Whilea line chart shows only closing prices, bar charts include the high and low pricesfor the period being viewed as well as the opening price and the closing price.Figure 2.3 shows a daily bar chart with several sharp spikes up and down atcritical turning points and the channels that formed during trending periods. Eachbar is drawn between the high and low price for the period, and the open andclose are indicated with the small hash marks on the left and right side of the pricebar, respectively. Such details were lost on the line chart.Again, as with any chart type, bar charts are used for many time frames, fromweekly and monthly down to intraday 60-minute or 1-minute periods. A bar chartcan even be drawn based on a specified number of price ticks, which creates many
FIGURE 2.3 Daily bar chart. Each vertical bar is drawn between the high and low for theperiod, and the opening and closing prices are indicated with the small hash marks.(Source: eSignal, www.esignal.com)
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bars during hectic periods and few bars during quiet times. Which time frame ornumber of ticks to choose is up to you and will depend on how sensitive you wantyour charts to be.Candlestick Charts Moving beyond the bar chart, some traders like a type ofchart with a more visual presentation of price relationships introduced to Westerntraders in about 1990. These are called candlestick charts because the body, representing the difference between the opening and closing prices, looks like a candle,and the shadows, representing all the price action above and below the body during the time period depicted, look like wicks.If the closing price is above the opening price, the body is usually clear, white,or green. If the closing price is below the opening price, the body is usually solid,black, or red. Candlestick charts provide a quick visual picture of the relationshipbetween opens and closes and their relative strengths or weaknesses, especiallyfor extended periods.Figure 2.4 shows a daily candlestick chart with two of the many candlestickpatterns labeled.• A doji is a candlestick in which the opening and closing prices are about thesame, resulting in a short body, and the high and low prices for the period extend above and below. It is most useful as a signal when it appears after a runup in prices and may indicate market uncertainty, which often precedes a turnin the price trend.• A hammer is a candlestick in which the body is at the upper end of the trading range for the period with little or no upper shadow; another shadowstretching out below the body is at least twice as long as the body. It oftenoccurs at the bottom of a downtrend and indicates a rejection of lows and areversal higher.Another well-known candlestick formation (not shown on this chart) is a twocandle signal called an “engulfing pattern.” In the bullish version, the first candle isa black, red, or filled candle after a downtrend. The second candle is a white, green,or clear candle with the open below the first candle’s close and the close above thefirst candle’s open. In other words, the second candle’s body engulfs the first candle’s body and suggests the market is ready to change to an upward price direction.Other colorfully named candlestick patterns include the hanging man, shooting star, harami, and spinning top. What all of these candlestick formations looklike, what they mean, and how they can be used in trading is a study in itself thatgoes beyond the scope of this introductory text. Some patterns involve only onecandle; others require several candles. In all cases, much of the interpretation depends on where the pattern occurs on the chart.Point-and-Figure Charts A lesser-known charting technique is the point-andfigure chart, which is worth mentioning because of the interesting way it focuses
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FIGURE 2.4 Daily candlestick chart. Each vertical bar is drawn between the high and lowfor the period. The distance between the open and the close is used to form a wider “body”section. (Source: eSignal, www.esignal.com)
on price action and eliminates reference to time. Point-and-figure charts appear tohave a random series of Xs and Os across a graph instead of a price bar or candlefor each time period. They are popular with floor traders, who find them easy tocreate and update even during hectic trading conditions. Figure 2.5 illustrates thepoint-and-figure technique, which was more popular in the past than it is today.A point-and-figure chart has two essential measurements. The first is the priceunit for each box on a vertical scale; the second is the number of boxes it takes toreverse a column of Xs representing an uptrending market to a column of Os thatrepresents a downtrend or vice versa.To keep the illustration simple, this basic point-and-figure chart uses dailygold futures closing prices and assigns a value of $2 to each box and a reversalvalue of one box. It takes a price change of just one box or $2 to reverse from Xsto Os or Os to Xs. As long as prices continue to make new highs, you place an X ina box at each $2 higher increment, building up the X column. If the high is not highenough to put another X on top of the column, you look at the low, and if it is atleast $2 below the value of the top X you move one column to the right of the X
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FIGURE 2.5 Point-and-ﬁgure chart. Xs represent upticks and Os show downticks. Eachnew vertical bar begins once the market reverses by a predetermined amount, withoutﬁxed references to time. (Source: eSignal, www.esignal.com)
column and begin a column of Os. Then, every time the price falls by one box or$2, you continue to add Os to the bottom of the O column.Because there is no entry on the chart for each time period, as there is forother charts, it may take many periods before the market changes from a columnof Xs to Os. Note on the chart that for the whole month of September there wasjust one column of Os and one column of Xs.Buy signals occur when a column of Xs exceeds the previous column of Xs—or, better yet, several previous columns of Xs—or when a column of Xs breaksabove a 45-degree-angle downtrend line. Sell signals occur when a column of Osdrops below the previous column (or several columns) of Os or when a column ofOs breaks below a 45-degree-angle uptrend line.Point-and-figure charts provide precise price points at which to act—there isless guessing about where a trend line crosses or what some indicator says.Price-Break Chart A less established charting format, but one worthy ofmention, is the price-break chart. Like a point-and-figure chart, a price-break
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chart focuses entirely on price action and obscures the reference to time. Technically, time is seen advancing from left to right. Figure 2.6 shows an exampleof a price-break chart that appears more familiar to traders who have usedtypical bar or candlestick charts. In this example, a $3 price change produces anew bar.
Reading the ChartsWe look only at bar charts in this basic introduction to chart analysis and focus firston chart patterns—those formations on the chart produced by prices themselves.Identifying the trend is the first goal of the technical analyst, so trend lines areat the heart of analyzing price action. Trend lines are generally drawn across thesuccessively higher bottoms in uptrends or progressively lower tops in the case ofdowntrends. Figure 2.7 shows examples of each on a mini-sized Dow futures contract. If you can spot points that may lead to a trend early in its development, youhave taken a big step forward as an analyst.
FIGURE 2.6 Price-break chart. In this less-established charting format, ﬁxed referencesto time are obscured as in a point-and-ﬁgure chart. (Source: eSignal, www.esignal.com)
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FIGURE 2.7 Trend lines. Up trend lines are drawn along bottoms and function assupport. Down trend lines are drawn across tops and act as resistance. (Source: eSignal,www.esignal.com)
Trend lines tend to be significant areas on the chart, acting as support belowor resistance above. Prices crossing the trend line may indicate that a change indirection has occurred. Technicians believe that once violated, support becomesresistance (in a sell-off), and that resistance becomes support (in a rally).Analysts sometimes like to draw channels using multiple trend lines off a basetrend line. Figure 2.8 is the same as Figure 2.7 but adds a parallel line to each trendline to create a channel. Using the uptrend line as the lower channel line, a parallelupper channel line can be drawn across the progressively higher tops of the uptrend. Prices often have a similar range for each bar, so most of the price activityoccurs within the boundaries of the two parallel lines.As with any chart pattern, these channels can be traded in several ways. Sometraders use the channel lines as support and resistance, selling when prices approach the upper channel line and buying when they approach the lower channelline, assuming that prices will remain in this channel. Other traders will trade onlythe breakout of a channel, assuming that when prices drop below the lower channel line of an uptrend, for example, the market is reversing its original direction
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FIGURE 2.8 Channels. Adding a parallel line to a trend line creates a price channel.(Source: eSignal, www.esignal.com)
and will continue to move lower. Some traders who see this breakout wait for themarket to make a reaction back to the channel, as it often does, and then take aposition as prices approach the original trend line. A breakout in the direction ofthe channel may indicate that prices are becoming overextended, or converselymay wind up being the beginning of an extended runaway market. Evaluate allprice action in context with other indicators, studies, and time frames to gainclues about the market’s true situation.How you trade a trend or channel will depend on your own trading style andmay vary with your opinion about market conditions. However, being able to identify a channel and the boundaries that may contain price action can be very usefulfor helping you decide where to place stop or limit orders (see Chapter 7) andhelping you see the general flow of price action.When prices track sideways for an extended period, a trading range patternforms another type of channel, a sideways channel, which may occur at bottomsor tops until the market makes a decisive move.So how can you tell whether a trend will continue or it will change? Analystsuse a number of chart patterns to make this decision. Broadly considered, chart
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patterns fall into two categories—continuation patterns and reversal patterns.This chapter looks at only a few of the better-known examples of each, emphasizing that there is much more to chart analysis than what you see presented here.
Continuation Chart PatternsMany uptrending charts have areas where prices consolidate for a few periods oreven make a downward correction. Nearly every trend unfolds in that manner—several steps forward in the direction of the main trend and then a step backwhere the market appears to be assessing its situation and taking a breather torest up for the next leg in the direction of the trend.These congestion areas are a normal part of trend building and channelsand often form patterns that look like triangles. Analysts identify several different types.Symmetrical Triangles or Pennants The pennant pattern typically showsup in the middle of a trend and is formed when price ranges for each bar becomesmaller and smaller as highs become lower and lower and lows become higherand higher (see Figure 2.9). As price action tightens as it moves to the apex of thetriangle, it tends to spring out with a sharp move, usually in the direction of theoriginal trend. The breakout typically occurs about 75 percent of the way to theapex of the triangle. The breakout that occurs beyond the 80 percent distance tothe apex is suspect and may fail to follow through.Ascending Triangles These patterns are more likely to appear at market bottoms and feature a series of higher lows while highs form a relatively flat horizontal line marking the top of the triangle. This indicates a strengthening market, anda breakout of the topside of the triangle suggests prices will rally.Descending Triangles This pattern reverses the appearance of the ascendingtriangle and is formed by a series of lower highs while lows make a relatively flathorizontal line that marks the bottom of the triangle. This indicates a weakeningsituation as traders won’t push prices higher, and a breakout through the bottomsuggests an ongoing downtrend.Flags A flag formation is also a congestion area but instead of prices compressing to an apex as in the triangle, price action is more erratic and appears to be asmall countertrend against the main trend (see Figure 2.9 and Figure 2.10). A feature of some flag formations is the flagpole, a sharp move over one or several periods that stands out on the chart, followed by the congestion area that looks like awaving flag.Analysts use the length of the flagpole as a measuring tool, taking the length ofthe flagpole from its beginning to the point where the congestion starts to form theflag, and adding it to (or subtracting it from) the point where prices break out of
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FIGURE 2.9 Pennants and triangles, and a ﬂag. Congestion areas are a normal part oftrend building and often form pennants, triangles, and ﬂags. (Source: eSignal,www.esignal.com)
the flag congestion area, in order to establish targets for a move after the breakout. The flagpole on the E-mini S&P 500 chart (Figure 2.10) stretches from just below 790 to above 890, a length of a little more than 100 points. Added to the pointwhere prices break out of the flag around 870, the objective is 970, which pricesreached about two months after the flagpole after several setbacks marked bysmaller flags.Not shown is a much more conservative forecasting measurement. The vertical distance between the parallel lines of the flag can be added to the breakoutpoint to forecast a minimum price objective. This short-term objective is often soclose it remains within the flagpole area.Analysts also expect triangles and flags to occur about halfway through alonger move, adding another way to arrive at a price target. Of course, all of thesepatterns and measurements can be rather subjective, depending on the points youchoose. However, keeping in mind that some art is involved in chart analysis, theycan give you some idea about the potential extent of a price move.While some patterns suggest the trend in place will persist, other patterns indicate that a trend is ready to give way to a new trend in the opposite direction or
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FIGURE 2.10 Flagpole. The length of the ﬂagpole can be added to the breakout point ofthe ﬂag to forecast an objective for the price move. (Source: eSignal, www.esignal.com)
at least a period of sideways price action. Let’s review a few of the more commonreversal patterns.
Reversal Chart PatternsChannel Breakouts The breakout of the channel mentioned earlier is one example of a reversal signal. Some traders may require two closes or three closes below the trend line rather than just an intraday penetration of the trend line or mayrequire the market to move a specific percentage through the trend line to confirmthe reversal pattern.M Tops In this topping pattern, prices run up to a high, drop back to an interimlow, rally again to near the same level as the first high, and then fall back again.When prices fall below the interim low, it’s a signal to go short as an M top hasbeen confirmed (see Figure 2.11). The pattern may look like a double top or thesecond high may be a little below the first high. In any case, breaking through theinterim low is the key to this reversal pattern.
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FIGURE 2.11 M top, also called a double top. Prices breaking below the interim lowconﬁrm the pattern. (Source: eSignal, www.esignal.com)
W Bottoms This bottoming pattern is a mirror of the M top: Prices decline intoa low, rally to an interim high, sink back toward the low, and then rally again.Prices moving above the interim high indicate the bottom is in place and it’s timeto go long (see Figure 2.12). The pattern looks like a double bottom although thesecond low may be a little higher than the first low. Again, breaking above the interim high is the key to this reversal pattern.Head-and-Shoulders Top or Bottom This formation is an extension of theM top or W bottom. As a topping pattern, the market makes a high (shoulder), dipsto an interim low, rallies again and this time makes a higher high (head), dropsagain to another interim low at about the same price level as the previous low,stages another rally to about the same price level as the first high (shoulder), andthen sinks again (see Figure 2.13). A movement below the neckline, preferablyclose to a horizontal line, signals the topping pattern is complete and it’s time to goshort. Typically, however, there will be some pausing action that occurs at theneckline before the market continues lower.
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FIGURE 2.12 W bottom, also called a double bottom. This pattern is a mirror of the Mtop. (Source: eSignal, www.esignal.com)
Analysts also use the head-and-shoulders pattern to project price targets.Techniques vary for making this measurement, but one way is to calculate the distance between the top of the head and the neckline and subtract this distancefrom the breakout area of the neckline to arrive at a price objective.Rounding Bottoms These are also reversal types of formations, but the signals aren’t