Profiting with Chart Patterns book

Support & Resistance: Bank of America.
The first Support and Resistance example we will look at is Bank of America (BAC). 
If I look at the 2015 trading year you can see there is a zone around the $18 mark that 
could be penetrated. The market tried to rally Bank of America through it in July 2015 
as it pushed right up to that $18 range and just could not hold above it. When it 

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Chapter 3 Definitions, Structures, & Examples
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 Nirvana Systems Inc.
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Profiting with Chart Patterns
backs off for that third time and starts coming down to the $17 range, you know the 
market is going down from there with very high odds. We just do not know how much 
it is going to move. We draw our Eights scale across the prior move. If I look on this 
chart -- this is very subjective -- I would say that relative to the size of the prior 
movement, that setting your Eights scale towards the lower support at $15 would be 
a good starting range. Remember that the placement of the Eights scale is not critical; 
However, it is better if you place one that is closer to the dimensionality of the chart.
Figure 3-4.
Support and Resistance Pattern Shown on the Chart for Bank of America
Using the scale that I chose, from $18 to $15, you can follow the move all the way 
down from the hypothetical short trade at $17.40. You can see that I did not close 
below an Eights scale line and go back up across the prior to the end throughout our 
Eights scale. In cases like this I like to draw another Eights scale as an extension. 
What the Eights tool is doing in this chart is it is keeping me in the trade through 
several places in the chart where it is bouncing up and down. Again, you have to look 
at where the price bars close. You have to wait for the close of the day and look at the 

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Chapter 
3 Definitions, 
Structures, 
& 
Examples
Profiting with Chart Patterns
3-6
nirvanasystems.com
closing price. If they close below the line, in this example because we are going short, 
then I move my stop down to the prior Eights scale line. If you look at the end of 
January into February, we did not close just below the $13 level so that is why we did 
not get taken out near the cross of the $13.75. The market did not close through there 
until we actually broke down and starting moving lower.
The Eights tool will keep you in trade much better than any other trailing stop. It does 
this because you are matching the stop values to the dimensionality of the chart.