Understanding K-Line Technical Analysis at a Glance
The Mysterious N-Shape Theory
The N-Shape Theory is a classic trend pattern in K-Line technology, rooted in wave dynamics and the intentions of major players. It simplifies price fluctuations into an 'N' shaped structure, helping investors identify trend continuations or reversals.
1. Basic Definitions and Principles
The N-Shape is not a single K-Line, but a continuous fluctuation composed of multiple K-Lines (usually 3-10), resembling the uppercase letter 'N'.
Principle: Market prices move in waves, with the first segment being the driving wave (trend direction), the middle being the adjustment wave (pullback consolidation), and the second segment being the continuation driving wave. This reflects the intentions of major players in accumulating, consolidating, and driving up prices.
2. Pattern Classification
1. Bullish N-Shape
Structure: Low point A → High point B (first rise, volume increases) → Low point C (pullback with reduced volume, C higher than A) → High point D (second rise, D higher than B).
Meaning: Strong bullish momentum, trend continues upward after adjustment. Commonly found in ascending channels as a buy signal.
2. Bearish N-Shape
Structure: High point A → Low point B (first decline) → High point C (rebound, C lower than A) → Low point D (second decline, D lower than B).
Meaning: Strong bearish momentum, trend continues downward after rebound. Serves as a sell/short signal.
3. Formation Conditions
Number of K-Lines: At least 3-5, applicable to hourly, daily, weekly charts, and various other timeframes.
Volume-Price Coordination: Driving wave shows increased volume (large bullish candlestick), adjustment wave shows reduced volume (small bearish candlestick).
Strength Requirements: The amplitude/speed of the second driving wave should be stronger than the first wave; the pullback amplitude should not exceed 50%-61.8% of the previous wave (Fibonacci ratio).
Position Requirements: Should appear within the trend channel, avoiding isolated patterns.
Auxiliary Confirmation: Combine with moving averages (above MA), MACD golden cross, RSI not overbought, and other indicators.
