How to Determine the Difference Using Technical Analysis
When interpreting charts to distinguish between Market Corrections and Bear Markets, it is imperative to keep in mind the following:
1. The Market Structure has changed massively in the past decade so consequently the older technical patterns, candlesticks, and trends have changed. Therefore these change what you need to study and analyze in the charts.
2. The Downtrend behaves differently than the Uptrend. It moves faster with a more severe Angle of Descent™ than the Uptrend, which alters analysis interpretations.
3. Who controls price tells you what to expect next. Just recognizing a Dark Cloud or an Engulfing Black Candlestick is not enough, which is just basic Technical Analysis.
4. Topping Patterns have altered in major ways. This means you must learn the new Topping Patterns, otherwise you may be buying a stock as it is topping without even knowing it.
The index chart below is a good example for distinguishing between Market Corrections and Bear Markets using the above list of Technical Analysis areas that Retail Traders must learn.
Notice how precisely price trades to the highs and lows of the sideways action. First there are slightly lower highs, then the lows were higher in the Trading Range, and finally the highs are lower.
Martha Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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