Profiting with Chart Patterns book

Figure 1-1.
Saucer Patterns Identify Timeframes for Open Market, Inc.
In timeframe B, the pattern actually formed over about three months. You can see that 
it is a wider and larger pattern. The point is that someone looking at the chart and 
detecting the Saucer pattern in timeframe B is going to be looking at the chart going 
back to July. The dimension of the pattern is something like November to January —
through the end of the chart, as opposed to December Through January. The pattern 
actually goes all the way back to October on a psychological basis. Again, this all has 
to do with where the pattern is (and its size), relative to the prior area of the chart.

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Chapter 1 Tools of the Trade
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Profiting with Chart Patterns
Prior Move Test
Next, we want to look at the prior move test. Look at this conceptual example. On the 
left, I have a support level at the bottom of the chart and a resistance level at the top. 
If I were trying to trade a bounce off that support (A), we could use the prior trading 
range (H) which is likely being observed by the market. It is not the bottom zone of 
that chart or something larger to the left. It is the zone—from the resistance line to the 
support line. That is what the market would recognize as the prior move ahead of A.
Figure 1-2.
Identify Prior Moves by Identifying Clear Moves Ahead of the Signal
In the second chart, we have a lot of things going on ahead of point B. You could argue 
that there is a prior move in the middle of the chart going down before rising up to B. 
The point is that B is much more ambiguous. If you have a chart that is moving all 
over the place and there is not a clear prior move leading up to the pattern, the pattern 
is probably not going to work the way they usually do. Again, all of this has to do with 
psychology. You want to pick out a prior move that the market is going to say 
something like, “This stock, futures contract, or whatever was trading between these 
two points before this pattern formed.” That is the prior move that relates to the 

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Chapter 1 Tools of the Trade
Profiting with Chart Patterns
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nirvanasystems.com
pattern and that you will use to draw your Eighths tool. If the pattern is not clear, then 
do not trade that symbol because the pattern is most likely not going to work the way 
they usually do.