Profiting with Chart Patterns book

Breakaway Gap: Teradata
Here is a very good example of a Breakaway Gap that occurred on Teradata. Note that 
the size of the gap is very large compared to other places in the chart. 
Figure 3-23.
Breakaway Gap Shown on the Chart for Teradatal
If we go back to the left of the chart, there are two fairly large gaps that are not 
marked. The first one occurs at the end of February where we have prices moving in 
a trading range. It suddenly takes off with a Breakaway Gap to the downside. Then 
we have another gap a little bit later around May. Move forward to August where we 
have the gap marked and you can see that it is a true gap with an actual distance across 
to the next bar. That is your Breakaway Gap. Using the Eighths tool and we could stay 
in the trade all the way to November and get out at about $28. That was 13% profit 
on that trade. This illustrates how well the Eighths tool works in managing trades.

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Chapter 3 Definitions, Structures, & Examples
©
 Nirvana Systems Inc.
3-25
Profiting with Chart Patterns
Volume Climax & Trend
Pattern number six is one of my favorites. The Volume Climax is something that I 
believe I discovered. I had not seen it written up in any Technical Analysis literature 
until I started using these patterns to trade with several years ago. A Volume Climax 
pattern is a place where volume increases and then decreases. You notice we have two 
different kinds of patterns, one called a Volume Climax and the other is called a 
Volume Trend. The difference is that in a Volume Climax pattern, when you have 
volume turning around, the price chart also turns around. It can either turn to the 
downside or to the upside. On a Volume Trend pattern, you have the price continuing 
to move in the same direction that it was moving before. Volume Trend almost works 
like a Measured Gap to measure the midpoints of moves in charts. 
Figure 3-24.
Volume Climax and Volume Trend Pattern
These are very powerful chart patterns. They do not form that often, especially not the 
very obvious ones. But, when they do form they are very tradeable. The psychology 
behind the Volume Climax and Volume Trend pattern is that you have a large amount 
of buying and selling going on—a suddenly increased amount that then backs off. 
What has occurred is that most of the players that wanted to transact around that price 
have done so and so there is very little resistance to continued direction of movement. 
Whatever direction the chart is going when the Volume Climax completes, that is 
typically the direction that it will continue moving.

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Chapter 
3 Definitions, 
Structures, 
& 
Examples
Profiting with Chart Patterns
3-26
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