|A basic principle of technical analysis is that security prices move in trends. We also know that trends do not last forever.
They eventually change direction and when they do, they rarely do so on a dime. Instead, prices typically decelerate, pause, and then reverse.
These phases occur as investors form new expectations and by doing so, shift the securitys supply/demand lines.
The changing of expectations often causes price patterns to emerge. Although no two markets are identical, their price patterns are often very similar.
Predictable price behavior often follows these price patterns.|