Yard Charts Technical Analysis Software: Horizontal Resistance Pattern
Pattern Overview
Horizontal Resistance is a recognized trend continuation pattern within YardCharts, commonly identified in technical analysis. It typically. emerges during upward reactions within a broader downtrend or as an obstacle to bull markets emerging from recent or historical market bottoms.
- Downtrend Identification: The market is clearly in a downtrend (Segment 1, Picture A), reaching a recent low (Point B), followed by a partial retracement to form a peak (Point C).
- Resistance Formation: After setting a new low (Point D), the market retraces to a horizontal level (Dotted Line G, Picture A), which previously acted as the starting point for the decline to the new low.
Trading Strategy
- Entry point: Optimal for initiating a bearish trade when the price nears the established horizontal resistance (Point C, Picture B), anticipating a continuation of the downtrend.
- Risk Management: A stop loss should be positioned just above this resistance line (Line A, Picture B) to manage risk, offering a favorable risk-reward ratio if the downtrend resumes.
YardCharts Horizontal Resistance Alerts
Alert lypes: YardCharts provides two alert levels:
- 10% Alert: Triggered when the price retraces 90% of the distance from the recent low to the previous resistance level (Line F, Picture C).
- 5% Alert: Activated when the price retraces 95% of the same distance, offering a closer entry with potentially few but more precise signals.
Performance
YardCharts has identified two instances where the Horizontal Resistance pattern led to successful trades, with the stock price decreasing at least threefold the distance to the stop loss from the entry point without triggering the stop loss.
Note: All visual references (points, lines, segments) are depicted as they would appear in all of Yardcharts Scanning Stations.
