oda.krell
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June 16, 2014, 04:55:19 PM

A curiosity question for those who believe in TA (which I still don't, sorry): are its rules symmetrical with respect to up and down? Namely, if a certain pattern is supposed to impliy This and That, is the same pattern, but upside down, supposed to imply the opposite of This and That?

(I am asking because I recently edited the Wikipedia article on 'cup and handle' (wait, no need to panic yet  Grin!), and it only discusses the 'upside-up' version, no mention of an 'upside-down' one.  But wasn't a reversed cup and handle mentioned in this thread, some time ago? Or maybe it was some other upside-down pattern?)

I'd never call TA 'rules', but let's say the question is: do all methods apply equally to rising prices as they do to falling.

No, though some do.

Example of those that do apply symmetrically: moving resistances (say, based on a moving average) are considered support once they are broken convincingly.

Example of those that don't: Most indicators meant to signal a reversal of some trend inside larger market trend don't.  Say for example the larger market trend is a bear market, like the one we've seen since December (and that we seem to have left last month). Say further that you are planning to trade smaller "swings" inside this larger context. If you would trade purely reactive, based on momentum signals like moving averages crossovers, you would probably demand a lot more evidence that the price about to go up than that it is about to go down. In other words, you'd look at a more sensitive indicator to tell you when to sell, and a more lagging one to tell you to get back in.

EDIT: if you mainly have candle patterns in mind, then I think most of those apply symmetrically (e.g. hammer vs. inverted hammer). But perhaps someone who's more knowledgeable about those can comment on that.