Success in any field requires good learning methods; if you want to quickly improve your trading level in the stock market, you should first focus on one area before branching out. Since 1998, I have been seriously studying the practical techniques of chip distribution and have consistently used this technique for 13 years; I can say that before I studied fundamentals, most of my achievements were due to the chip techniques.
Today I took the time to share the techniques of chip peaks with everyone, hoping it can help you make money in the stock market.
What is a single peak concentration?
A single peak concentration is an independent concentration formed by mobile distribution, indicating that the circulating chips of the stock are sufficiently concentrated within a specific price range. This is reflected in the moving average as a convergence of moving averages, and from a pattern perspective, it is box consolidation. The appearance of a single peak concentration at a low level is a sign of a potential breakout for a strong stock.
There is almost no chip distribution above the low-level dense peak, and as time goes on, the horizontal line length of the bottom chip peak will be very long, while chips in other areas will become increasingly sparse; this indicates that the main force's accumulation is nearing completion.
1. What is a single peak concentration? A single peak concentration means that the chip distribution presents a single peak shape:
2. What is a double peak concentration? A double peak concentration means that the chip distribution presents a double peak shape:
3. What is a multi-peak concentration? A multi-peak concentration means that the chip distribution presents a multi-peak shape:
When a low-level chip single peak concentration pattern appears, one can patiently wait for the main force to signal the beginning of the upward trend:
1. Towards the end of a bottom consolidation, the stock price may suddenly experience a volume decrease, but will quickly return to the consolidation range.
2. The stock price starts to rise slightly or rapidly, accompanied by increased trading volume.
3. As the stock price rises, the moving averages start to show a bullish divergence.
4. The stock price quickly stands at the top of the chip single peak, indicating that the stock price has already departed from the chip concentration zone, and an upward trend will likely follow.
5. After the stock price rises, if a pullback occurs, this chip peak position will become a better support level for the stock price.
6. When the stock price rises, usually the trading volume also increases. Investors should analyze trading volume in two situations: when the stock price rises, if the trading volume significantly increases but the chip peaks do not rise along with the stock price, it indicates that the main force may have locked in positions and the future upward space for the stock price is very large.
Example:
The price has effectively risen above the chip peak, and a pullback is bound to occur! The pullback will be on low volume! Enter decisively on the first bullish line that releases volume!
Determine buying and selling points through chip analysis.
First pattern: Volume breakout through low-level single peak concentration.
Key point from the chart: After a long period of consolidation, the stock price moves with the chip distribution concentrated at a low level, forming a single peak. A breakout with increased volume through this single peak is usually a sign of an upcoming bullish trend.
Tip: Once the price effectively rises above the chip peak, a pullback is bound to occur! Moreover, the pullback will be on low volume!
Second pattern: Multiple peaks concentrated in an uptrend continue to rise.
Key point from the chart: After the stock price rises through the dense low-level peaks, it starts an upward trend, causing fluctuations during the rise that form one or more dense peaks. When the new dense peak forms, the original dense peak decreases but still exists. The fluctuations during the rise are of a washout nature. Each dense peak will become a strong support level for the stock's pullback.
Tip: New peaks increase, original peaks decrease; this is not relative, but absolute. Although the original peaks decrease, their shape remains unchanged; here it means reduction, just that the proportion of chips at this position has relatively decreased!
Third pattern: Breaks below high-level single peak concentration - Downtrend begins.
Key point from the chart: The stock price has already risen significantly. The original low-level single peak has dissipated, forming a high-level single peak. It is not advisable to enter at this point.
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