Chart patterns are a type of technical analysis that traders use to predict price trends. They are identifiable patterns in trading based on past price movements that produce trendlines revealing possible future moves. In this article, we share a list of twelve patterns. Save the page to study each of them closely later in our blog.
Falling and Falling Wedge. The Falling Wedge pattern is considered bearish and implies that an asset is approaching a reversal. It is similar to an ascending triangle, but the resistance and support lines are sloped. The Rising Wedge pattern is considered bullish and implies that an asset is likely to reverse course and appreciate. It is similar to a falling wedge, but the trend is reversed.
Bull Flag Pattern. This pattern is considered a bullish continuation chart pattern and a sign that the market will advance. It is probably the most popular and easiest pattern to learn. It consists of a strong move up on high relative volume, followed by a “break” and consolidation near the top of the pole, forming the flag. Then, a “breakout” of the consolidation on high relative volume continues the upward trend.
Cup and Handle. This is a continuation charting pattern that implies an asset is likely to form a bullish trend. It is similar to a rounding bottom pattern, but it includes the addition of what resembles a coffee mug handle.
Engulfing Candlestick. This pattern is when the second candle’s body covers the whole body of the previous candlestick. The bullish engulfing candle is one of the best candlestick patterns to signify a reversal in the market. When spotted, the buyers or sellers have been aggressive enough to bring the price back to a level beyond the extreme level of the previous day.
Head and Shoulders. This pattern is often considered the most profitable trading chart pattern. It is a bullish reversal pattern that consists of three peaks, with the middle peak being the highest. The pattern is considered reliable with an 89% success rate.
Flag Pattern. The flag is a continuation chart pattern formed using two parallel trendlines that move opposite to the dominant trend observed on the longer time frame price chart. The flag’s formation is often accompanied by declining volume, which recovers as the price breaks out of the flag formation.
Ascending Triangle Pattern. The ascending triangle is a bullish continuation chart pattern created by placing a horizontal line along the swing highs (resistance points) and an ascending trendline along the swing lows (support points).
Descending Triangle Pattern. Contrary to the ascending triangle, the descending triangle is a bearish continuation chart pattern in which the support line connecting swing lows is horizontal, and the resistance line connecting the swing highs is descending.
Symmetrical Triangle Pattern. A symmetrical triangle is a continuation chart pattern in which two trend lines converge in an equal slope. The support line connects the lower highs, and the resistance line is drawn, connecting the higher lows. The breakout can happen from either direction.
Rectangle Pattern. Rectangles are continuation chart patterns in which the price moves up and down between parallel support and resistance lines, indicating the absence of a trend. The rectangle ends with a breakout as the price moves out of the rectangle.
Pennant Pattern. A pennant is a chart pattern that resembles a flag or a wedge. It’s a reversal pattern that signifies a change in trend direction. It’s often used to identify potential reversals in a trend.
Double Top and Double Bottom Patterns. These are chart patterns that consist of two peaks or troughs. A Double Top pattern is a bullish reversal pattern that signals a potential downward price trend. A Double Bottom pattern is a bearish reversal pattern that signals a potential upward price trend.