Patterns are everywhere. Some of them are geometrical and some of them are numerical. What is one way in which patterns can be used? Give a real-world example of a pattern and identify the terms and the sequence.
Throughout in this unit, think about how patterns are used in everyday activities. As you continue to learn more about patterns, continue to add to the discussion to support your answer. You will need to respond to a post made by at least one classmate.
One way in which patterns can be used is in financial forecasting and investment analysis. Patterns in stock prices, for example, can help investors predict future trends and make well-informed decisions.
A real-world example of a pattern in the stock market is the "head and shoulders" pattern. This pattern is formed by a peak (the head) with two smaller peaks on either side (the shoulders). It is considered a bearish pattern, indicating that the stock price is likely to decline in the future.
In terms of the sequence, the head and shoulders pattern can be identified by the following sequence:
1. The stock price reaches a peak (left shoulder).
2. The price retraces and forms a new peak higher than the left shoulder (head).
3. The price retraces again but does not reach the level of the head, forming a third peak (right shoulder).
4. The price breaks below the neckline, a line drawn through the lowest points between the peaks, confirming the pattern.
By recognizing this pattern, investors can anticipate a potential downward trend and adjust their investment strategies accordingly.
It's important to note that patterns alone should not be the sole basis for investment decisions, as there are various factors that can influence stock prices. It's always recommended to conduct thorough research and analysis before making any investment choices.