This article on the EUR/USD is written from the perspective in applying a form of advanced Fibonacci analysis called ‘DiNapoli levels.’  Rather than providing recommendations, strategies or forecasting market direction, the following is an illustration of the approach in viewing market behavior using this method.

The double bottom reversal pattern is a topic that has been discussed and written about for decades. However, many traders have difficulty trading double bottom reversals consistently.  I believe that a major reason for this is that traders do not understand how to properly analyze the pattern to know when the probabilities favor a market reversal versus a continued move lower through the double bottom. This article focuses on the key ingredients necessary to identify which double bottom patterns produce a market reversal so that you can increase your confidence level at these trading areas on the price chart. We will be using Wyckoff Candle Volume Analysis (WCVA) as our analysis tool to confirm the high-probability double bottom pattern.

Featured in the April 17, 2000 issue of BusinessWeek is an article by Dr. Andrew Lo of the Massachusetts Institute of Technology.  The article was entitled “This Alchemy Can Yield Pure Gold” and in it, Dr. Lo and his associates from the Department of Applied Mathematics at M.I.T. summarized their studies into applying pattern recognition to the financial markets.  Using data from various markets spanning from 1962 to 1998, the group looked at over 800,000 patterns commonly associated with technical analysis such as double tops, double bottoms, flags and head-and-shoulders among others.

“What is the trend?” and “Where should one enter a position in its direction?”

These questions are asked of the market technician by savvy traders, investors and the financial media after a market has made a sharp movement in one direction or another taking most of the crowd by surprise.