Trading Three Valleys and A River

Trading Three Valleys and A River Pattern

The chart above illustrates an example of "Three Valleys and A River" pattern from Tyco's (TYC) weekly chart. From April 2005 to October 2006, TYC formed three "valleys" and attempted to rise three times beyond $30. A trend line is drawn in the chart above connecting the three valley tops for a trade setup. In October 2006, Tyco closed above the trend line to signal a potential long setup.

1. Enter a "long" trade above the high of the breakout bar at $27.

2. Place a "stop" order below the trend line to protect the trade at $25.5.

3. Place a "target" at the 62% range of the all three valleys.

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