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By Dan Gibby

Technical price patterns show the supply and demand relationship of whatever is being traded.
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same.
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What is a Shock Pattern?
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Some of our top patterns include Buy and Sell Setups; Breakouts and Breakdowns; 1-2-3 Con-
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A Shock Pattern is a compelling pattern like those mentioned which Fail.
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IROORZWKURXJKDVLQWHQGHGZDQWLQJXVWRH[LWHYHQLIEHIRUHRXUSUHGHWHUPLQHGVWRSORVVWULJ-
gered.
All Failed Patterns are not tradable. Although they are often a reason to get out of a trade not
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Shock Candlesticks and Patterns

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$VDOZD\VWKHTXDOLW\RIWKHWUDGHZLOOEHGLFWDWHGE\WKH6HWXSXVLQJ076ZLWK07)DOLJQ-
ment.

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$0DVWHU7UDGHU%X\6HWXSLVDUHWUDFHPHQWDQGUHYHUVDOLQDQXSWUHQGRQVXSSRUW7KHSDWWHUQ
suggests a resumption of the uptrend with higher highs and higher lows.
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entry, and management.
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analysis and overall pattern and trend recognition as a valuable message in that the bearishness
implied in the red bar failed, which is a bullish event.
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more inside bars which remain in the upper third of the +WRB. A larger Shock is created when
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+WRB.
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IDLOVZKLFKKDSSHQVLQYDULRXVZD\VQHJDWLQJWKHEHDULVKQHVVRIWKHEUHDNGRZQ$%XOO
Reversal is one type of Breakdown Failure.
A Failed Sell Setup is a retracement and reversal in a downtrend at resistance, then after entry
of the short position, the issue advances, negating the bearishness of the Sell Setup.
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time symmetry.
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Shock Pattern Examples
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analyze the messages of the setup and subsequent candlesticks.

Analysis at #1$OWKRXJK52.8KDGDULVLQJSHULRG0RYLQJ$YHUDJH0$DVLJQRI

intermediate-term strength, the gap down under the small consolidation that was below the d20-
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multiple levels of price support.
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veyed was bullish.
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Analysis at #20DVWHU7UDGHUFDOOVWKLVD3URIHVVLRQDO*DSDVH[SODLQHGDERYH7KHEX\SRLQW
was over the day’s high.
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the advance and retracement. The subsequent move was very bullish, not even retracing to
form a pullback and swing low for trail management.
Analysis at #352.8ZDVVWLOODFWLQJEXOOLVK,WJDSSHGXSDVLJQRIVWUHQJWKEXWZDVQRZ
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That -WRB was especially bearish as it engulfed most of the three preceding bullish bars, and
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If you were long from one of the prior bullish points mentioned, you were Shocked to see such
a negative reaction,DVWKLVEDUZDVDFRQFHUQXVLQJ076EDUE\EDUDQDO\VLV,I\RXZHUHORRN-
ing for a new bearish opportunity, this candlestick alerted you to a short-term top for new bear-
ish stock and option trades.
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Analysis at #4$IWHUWKHWZRELJJHVWEHDULVK:5%VLQ52.8¶VKLVWRU\LHKHDY\VHOOLQJLW
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ROKU was a bearish consolidation.
ROKU then gapped under all of the prior candles’ real bodies and could not rally much, an-
other sign of weakness.
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Analysis at #57KLVVHWXSLVD0DVWHU7UDGHU%HDULVK&RQWLQXDWLRQZKLFKLVD
-WRB, followed by an inside bar which doesn’t retrace more than a third into the -WRB. This
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reversal at the highs.

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0DVWHU7UDGHU7LS: The combination of technical patterns form high probability trading oppor-
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The Gap under the inside bar was an additional Shock to the bulls still in that green candle. The
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traders.
For managing a swing short, you simply cover over a prior day’s high as it approached the
green line connecting to the price support to the left.
Shocks from Failed Breakouts
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the day before the close, it was a Bullish WRB.

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prior breakout bar’s low.
This was a Shock to the bulls. The pattern and trend before the Shock Bar suggested higher
prices. The reversal and weak close created a lot of uncertainty about PSA’s ability to continue
its trend higher.
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questionable bullish breakout.
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Conclusion
The various forms of ShockSDWWHUQVH[SODLQHGDUHVRPHRI0DVWHU7UDGHU¶VIDYRULWHVHWXSV
EHFDXVHWKH\FUHDWHWKH³XQH[SHFWHG´SURYLGLQJJUHDWRSSRUWXQLW\WRWKRVHVNLOOHGZLWKWKLV
information.
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the trades at poor times and locations increase our opportunities.
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odds of success.
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trading and investing in the markets.
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DQGWUDGHPDQDJHPHQWXVLQJWKH0DVWHU7UDGHU0HWKRG070

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For many, the discipline to wait and follow
their Trading Plan is the hardest part.
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Financial Future Together, see https://
mastertrader.com
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comments, please e-mail Dan Gibby at Dan@
mastertrader.com
ABOUT THE AUTHOR
Dan Gibby0DQDJLQJ'LUHFWRURI0DVWHU7UDGHUFRP
SRVVHVVPRUHWKDQ\HDUV¶H[SHULHQFHLQHTXLW\DQG
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using options to hedge and speculate, and portfolio/
asset management. He formed Master Trader with
Greg Capra to provide education to stock and option
traders as well as consult for money managers and
high net worth investors on option strategies to
generate superior risk adjusted returns.
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