A Support/resistance Pattern Plotted by Chartists in the Stock Markets

question 77

Multiple Choice

A support/resistance pattern plotted by chartists in the stock markets is the rectangle,which consists of sideways price fluctuations contained within horizontal support and resistance levels.Which of the following statements in relation to indicators given by support and resistance rectangles is incorrect?

• A) Rectangles tend to be characterised by increasing volumes, except for a few days before the breakout when there are strong decreases in volumes of trade in the share(s).
• B) If the last bottom does not touch the support level (beginning the formation of an ascending triangle) and if prices then rise rapidly on increasing volume, it is likely that there will be a topside breakout.
• C) If the tops fail to reach resistance levels, beginning the formation of a descending triangle, a downside breakout is likely.
• D) When a break occurs from a rectangle, the extent of the breakout is likely to equal the height of the price rectangle.

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