QM Pattern, also known as the Quasimodo pattern, is a technical analysis tool used in trading to identify potential reversal points in a market trend. It is named after Notre Dame’s hunchbacked bell ringer, Quasimodo, due to the pattern’s distinct shape on a chart. The QM pattern is formed by the interaction of three key components: a peak, a trough, and a neckline in trading.
Identifying QM Pattern
To identify a QM pattern, traders must first locate a peak and a trough on a chart. The peak is the highest point reached by the price of a security, while the trough is the lowest point. These two points mark the beginning and end of a trend.
Once the peak and trough have been identified, the next step is to draw a line connecting them. This line is called the neckline. The neckline serves as a key reference point for identifying potential reversal points in the market trend.
The Bullish QM Pattern
The Bullish QM pattern is a bullish reversal pattern that appears at the end of a downtrend. It is characterized by a peak, a trough, and a neckline that slopes upward.
To confirm the Bullish QM pattern, traders should look for the following key characteristics:
- A peak and a trough mark the beginning and end of a downtrend.
- A neckline that slopes upward, indicating a potential reversal in the market trend.
- A breakout above the neckline BBsignals a potential reversal from bearish to bullish.
The Bearish QM Pattern
The Bearish QM pattern is a bearish reversal pattern that appears at the end of an uptrend. It is characterized by a peak, a trough, and a neckline that slopes downward.
To confirm the Bearish QM pattern, traders should look for the following key characteristics:
- A peak and a trough that marks the beginning and end of an uptrend.
- A neckline that slopes downward, indicating a potential reversal in the market trend.
- A breakout below the neckline signals a potential reversal from bullish to bearish.
Using Left Shoulder Level to your Advantage
One way traders can use the QM pattern to their advantage is by identifying the left shoulder level. The left shoulder is the point at which the market first begins to turn after reaching a peak. It is typically located near the neckline and serves as a critical reference point for identifying potential reversal points in the market trend.
Best Location of the Quasimodo Pattern on the Chart
The best location for a QM pattern on a chart is at the end of a trend, as it indicates a potential reversal in the market. However, it is important to note that the QM pattern is only sometimes reliable and should be used in conjunction with other technical analysis tools to confirm the market trend.
How to Trade QM Pattern?
There are two key ways to trade the QM pattern:
- Buy Signal: A buy signal is triggered when the price breaks out above the neckline of a Bullish QM pattern. This signals a potential reversal from bearish to bullish and indicates that it may be a good time to buy the security.
- Sell Signal: A sell signal is triggered when the price breaks out below the neckline of a Bearish QM pattern. This signals a potential reversal from bullish to bearish and indicates that it may be a good time to sell the security.
Conclusion
The QM pattern is a technical analysis tool used in trading to identify potential reversal points in a market trend. It is formed by the interaction of three key components: a peak, a trough, and a neckline.
The Bullish QM pattern indicates a potential reversal from bearish to bullish, while the Bearish QM pattern indicates a possible reversal from bullish to bearish. Traders can use the left shoulder level and the neckline as key reference points to confirm the trend. However, it is important to note that the QM pattern is only sometimes reliable and should be used in conjunction with other technical analysis tools to confirm the market trend.
The QM pattern can be useful for traders looking to identify potential reversal points in the market. By understanding the characteristics of the Bullish and Bearish QM patterns, traders can use them to make informed decisions about when to buy or sell a security. However, it is important to remember that the QM pattern is just one tool in a trader’s toolkit and should not be relied upon solely for making trading decisions.
