Technical Analysis Tools— Chart Patterns Summary

[Practice Problems] The exhibit depicts Archer Daniels Midland Company common shares, traded on the New York Stock Exchange, for 1996 to 2001 in US dollars. The exhibit illustrates most clearly which type of pattern?

A.       Triangle.

B.        Triple top.

C.        Head and shoulders.

[Solutions] C

The left shoulder formed at around US$18.50, the head formed at around US$20.50, and the second shoulder formed at around US$19.

[Practice Problems] In an inverted head and shoulders pattern, if the neckline is at €100, the shoulders at €90, and the head at €75, the price target is closest to which of the following?

A.       €50.

B.        €110.

C.        €125.

[Solutions] C

Target

= Neckline + (Neckline − Head)

= €100 + (€100 − €75) = €125