"I See Patterns" Like Haley Joel Osment hesitating to admit he could see dead people in The Sixth Sense, it took me a little while to acknowledge the patterns I was noticing. After all, I had spent a lot of time learning about fundamentals like price-to-earnings ratio and operating margin, and I'd been told they were the true way to make money in the market. But once I saw how effective patterns could be in helping me time my entries and exits, I embraced them quickly. There are several different types of patterns. One of the most common is a formation on a stock chart, like a head and shoulders pattern. This is a very bearish pattern. It occurs when a stock falls to the same level (the neckline) after three successive peaks, with the middle peak (the head) being higher than the first and third peaks (the shoulders). In the example above, fundamental analysis might've told you in late June that this stock was a good value, that the company was likely to grow its earnings, and that the stock would be a strong buy. But you might have changed your mind if you'd looked at the chart and spotted the head and shoulders pattern. That would've indicated that it'd be smart to wait and see if the stock was going to fall, allowing you to buy it cheaper. Perhaps your fundamental analysis would have been proven right in the long term. But by knowing this pattern, you could have saved yourself some money and heartache by not being in the stock while it was falling. There are other important patterns that can't necessarily be seen on a stock chart. One common pattern is described by the adage "sell in May and go away." The saying refers to the fact that stocks tend to perform much better from November to April than they do from May to October. In the 20th century, the average monthly return of the S&P 500 from November to April was 1.05%, versus just 0.27% from May to October. | 
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