Moving averages flatten out and price whipsaws above and below them.
One of the most referenced sections of the book is Shannon's breakdown of the market cycle. He categorizes price action into four distinct phases, borrowed and adapted from classic Dow Theory and the teachings of Stan Weinstein.
Protect profits, tighten stop-losses, and avoid building new long positions. Stage 4: The Markdown Phase
Stage 3: Distribution /---\ / \ Stage 2:/ \Stage 4: Markdown Markup / \ / \ / \____ Stage 1: Accumulation Moving averages flatten out and price whipsaws above
Shannon's second book is dedicated to the . However, the roots of this concept are in his first book. AVWAP allows you to start the VWAP calculation from a specific starting point—such as a major earnings gap, a swing low, or the start of a new trend.
The asset enters a sustained downtrend characterized by lower highs and lower lows.
Locate equities that are trading above a rising 20-day and 50-day moving average. Ensure the broader sector and market indexes are also showing positive alignment. Step 2: Identify the Consolidation (Intermediate Chart) Protect profits, tighten stop-losses, and avoid building new
Shannon emphasizes that every market moves through four distinct phases, and your strategy must change depending on the stage:
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Volume is the "gas in the tank." Shannon teaches how to properly analyze volume to confirm breakouts. A breakout on a higher timeframe that occurs on low volume is a warning sign. A breakout on high volume suggests commitment from large players. AVWAP allows you to start the VWAP calculation
The core philosophy of Shannon's work rests on the understanding that the market is . This means that price patterns look similar whether you are looking at a 1-minute chart, a daily chart, or a weekly chart. The trends on a lower timeframe are merely microcosms of the trends on a higher timeframe.
Mastering the Market Matrix: A Deep Dive into "Technical Analysis Using Multiple Timeframes" by Brian Shannon
A foundational element of Shannon’s book is the concept that all assets move through four distinct market cycles or stages. Recognizing these stages across multiple timeframes allows traders to position themselves on the side of institutional money. Stage 1: The Accumulation Phase