Profiting with Chart Patterns book

Trend Line Structures
Here is a picture that shows both a trend line bounce as well as a lower trend line 
break. You can see that we have two different Eighths scales. The reason for that is if 
I am trading those bounces on the trend line as the chart moves up, I want to use the 
relative move to the bounce, which is going to be those short little moves going up. 
So, that is the size of my Eighths scale. On the break however, I am looking at the size 
of the pattern being the entire move ahead of the break, which would be the wider 
scale. 
Figure 3-7.
Trend Line Structure Diagram
You can see that Reward:Risk for trend line breaks is typically going to be much 
higher because you can trade much quicker on the break of a line and set a reasonably 
tight stop behind it at the prior Eighths line. So, getting a 3:1 Reward:Risk is easier 
with trend lines than most of the patterns.

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Chapter 3 Definitions, Structures, & Examples
©
 Nirvana Systems Inc.
3-9
Profiting with Chart Patterns
Trend Line Break: Nordstrom
The first example is a very clear lower trend line break on Nordstrom in mid April of 
2015. You can see that the trend line touches about five points in the past. What you 
want to do is to draw a line up through at least three points—you can use two points 
but it is always better to have three or more points when you are talking about support 
and resistance or trend lines. In this example I actually had four or five, depending on 
how you look at it. You can see the points are pretty close to the line, even at the low 
in February. 
Figure 3-8.
Trend Line Break Pattern Shown on the Chart for Nordstrom
We break that line in April and see immediate weakness right after it. That is a strong 
indication that the chart is going down. Apply the Eighths tool across the prior move 
and you will see that you are kept in the trade down to $76. That would have been 
good for about a 5% profit on that trade. Again, the Eighths tool tends to keep you in 
for a very long time on daily charts. In this example it was a three month trade and 
that is great. As I keep reiterating, we are looking for these long trending trades.

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Chapter 
3 Definitions, 
Structures, 
& 
Examples
Profiting with Chart Patterns
3-10
nirvanasystems.com