IBD's Three Weeks Tight Pattern
Three tight closes is a technical analysis pattern that occurs when a stock closes at the same price for three consecutive weeks. The pattern suggests a period of consolidation before the stock moves in a new direction, either up or down.
––––HISTORY & CREDITS 🏦
The Three Weeks Tight Close pattern is a technical analysis pattern that occurs when a stock closes at nearly the same price for three consecutive weeks, suggesting a period of consolidation before the stock moves in a new direction. The concept of "line of least resistance" as mentioned by Jesse Livermore is closely related to this pattern. It indicates that there is a period of indecision in the market, with buyers and sellers fairly evenly matched. This pattern is often associated with stocks that have strong fundamentals and a solid business model. The pattern was first discovered by Investor's Business Daily founder William Bill O'Neill.
––––WHAT IT DOES 💡
The Three Weeks Tight Close pattern helps traders identify periods of consolidation in a stock's price movement. During these periods, the stock's closing price remains nearly unchanged for three consecutive weeks. This pattern can be a signal that the stock is under accumulation and potentially ready to make a significant move in either an upward or downward direction. By identifying these tight closes, traders can prepare to take advantage of the solid price run and make profitable trades.
The indicator plots 3 different dots/squares above the weekly bar on order to indicate which consecutive tight close wee have.
👉 Cyan color indicates 3 week tight closes
👉 Pink color indicates 4 week tight closes
👉 Red color indicates 5 week tight closes
––––HOW TO USE IT 🔧
• Focus on weekly charts for easier identification.
• Look for three consecutive weekly closes with nearly the same price, within 1-1.5% of each other. Using the indicator.
• Check for low volume during the tightening period.
• Once the pattern is confirmed, switch to the daily timeframe to find the exact buy point.
• Use other technical indicators to confirm a breakout before taking a position in the stock, such as breakouts, moving averages, and trend lines.
• Monitor the position regularly to ensure continued positive price movement.
• Be patient and wait for confirmation before buying in.
• Use stop-loss orders to limit losses if the stock does not move in the expected direction.
• Consider the overall market and its impact on individual stocks before making a trade.
• Keep in mind that not all three tight closes are created equal and use technical analysis to confirm your suspicions.
By following these steps, traders can use the Three Weeks Tight Close pattern to identify potential trading opportunities and increase their chances of making profitable trades.
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