Wolf WaveThe wolf wave is a chart pattern that can be used to help predict the price movement of a stock. In the pattern the stock bounces back and forth between support and resistance. The trading range gets smaller and the stock squeezes together, finally the stock breaks up out of the trading range and seems to make new highs.
Target the target can be found by drawing a line from the first low of the pattern thru the second high of the pattern (See Picture). The security is likely to meet up with this line at some point in the near future. Tip someone looking to trade this pattern might buy on the breakout and put a stop below the point it just broke out of. It is important to also manage your risk so that you do not lose too much on 1 trade if the pattern fails. Professional traders would buy this stock on the breakout and have some sort of stop loss on the stock if the position failed and broke back through support (former resistance) . If it did it would indicate that the pattern has failed and the position will likely continue to fall in the near future or at least it is unlikely to go up. Most traders would take this trade only if it met their own rules, risk to reward ratios, and did not give them too much risk. Other Trend Following Patterns |
