Education & Information
Buy Signals
Bullish Signal Pattern
The bullish signal pattern will occur after a sizable drop in a stock indicated by a long column of Os. Of course, the Os represent supply. Eventually, the selling will subside, the demand will meet the supply and the column of Os will end. In the example above, the long column of Os ends at $28. When the demand exceeds the supply the chart will change to a column of Xs. Above you will see the first column of Xs up to $32. Rarely will a stock drop and then go straight up. Usually bottoms take time to form. After the initial move up from the bottom, supply takes over again and the chart changes to a column of Os. If this next column of Os holds up higher than the previous column of Os it suggests that supply is losing strength. The stock then reverses back up in to a column of Xs. When this column of Xs rises above the previous column of Xs a bullish pattern is formed indicating that a bottom is potentially in place. This pattern should be treated differently depending on the longer-term trend of the stock (see major trends). If the stock is trading above the bullish support line (main trend is up) a bullish signal represents that a short-term correction in the stock is over and the main trend is reemerging. If it happens while the stock is trading below the bearish resistance line (main trend down), the bullish signal suggests that the stock’s advance should stop at the resistance line and, therefore, is more suitable for trading oriented investors.