Price Upsides Often Occur in Three Stages

Price upsides can take many forms but often they occur in three stages. The first stage has a well defined rate of increase and establishes the upside direction. The second stage rises at a steeper rate and the third stage often goes almost vertical forming a bubble. Since the bubble is unsustainable, prices quickly turn to the downside.

When you watch prices in real time, use the Price Direction Indicator (PDI) to help you spot the first stage of the upside. Buy during the first or second stage but do not buy during the bubble stage.

Sell anytime on the upside and sell quickly when prices turn down after the bubble peaks.

Related Articles:

Price Patterns - A Bubble Top Is an Extreme Pattern
Price Patterns - Bump and Run Reversal Top Defines Price Bubble
Price Patterns - A Double Top Signals a Downside
Price Patterns - Head and Shoulders Top Has Three Tops
Price Patterns - Triple Top Signals End of Upside Move

Updated February 25, 2008.