Stock Chart Pattern Guide

Understand key chart patterns used in technical analysis

Chart patterns visually represent past price movements and help predict future price directions. These patterns form due to the repetitive psychology and behavior of market participants. When effectively utilized, they provide valuable insights for determining buy and sell points.

First Bottom Second Bottom Bullish Signal
Double Bottom (W Pattern, Double Bottom)
Buy

The Double Bottom is a reversal pattern shaped like a "W," where two similar low points form. A breakout above the resistance level after the second bottom is considered a strong bullish signal.

Key Characteristics

  • The price levels of both bottoms should be similar.
  • There should be a reasonable time interval between the two bottoms.
  • Volume tends to decrease at the second bottom.
  • Volume should increase when breaking through the intermediate high.
First Top Second Top Bearish Signal
Double Top (M Pattern, Double Top)
Sell

The Double Top is a reversal pattern shaped like an "M," where two similar high points form. A breakdown below the support level after the second top is considered a bearish signal.

Key Characteristics

  • The price levels of both tops should be similar.
  • There should be a reasonable time interval between the two tops.
  • Volume tends to decrease at the second top.
  • Volume should increase when breaking through the intermediate low.
Neckline Left Shoulder Head Right Shoulder Bearish Signal
Head and Shoulders (Head and Shoulders)
Sell

The Head and Shoulders pattern is a strong reversal pattern consisting of a left shoulder, head, and right shoulder. A breakdown below the neckline signals a trend reversal.

Key Characteristics

  • The head (middle peak) should be higher than both shoulders.
  • Both shoulders should be at similar heights.
  • Volume tends to decrease when forming the right shoulder.
  • Breakout below the neckline should be accompanied by increased volume.
Neckline Left Shoulder Head Right Shoulder Bullish Signal
Inverse Head and Shoulders (Inverse Head and Shoulders)
Buy

The inverse head and shoulders pattern is the opposite of the head and shoulders pattern, consisting of three low points (left shoulder, head, and right shoulder). A breakout above the neckline signals a bullish trend reversal.

Key Characteristics

  • The head (middle low) should be lower than both shoulders.
  • Both shoulders should be at similar heights.
  • Volume tends to decrease when forming the right shoulder.
  • Breakout above the neckline should be accompanied by increased volume.
Low 1 Low 2 Low 3 Bullish Signal
Triple Bottom (Triple Bottom)
Buy

The triple bottom pattern consists of three similar low points, indicating a reversal. A breakout above the resistance level after the third low is considered a strong bullish signal.

Key Characteristics

  • Three lows should form at similar price levels.
  • Highs between lows should be at similar levels.
  • Volume tends to decrease at each low.
  • Breakout above resistance after the last low should be accompanied by increased volume.
High 1 High 2 High 3 Bearish Signal
Triple Top (Triple Top)
Sell

The triple top pattern consists of three similar high points, indicating a reversal. A breakdown below the support level after the third high is considered a bearish signal.

Key Characteristics

  • Three highs should form at similar price levels.
  • Lows between highs should be at similar levels.
  • Volume tends to decrease at each high.
  • Breakdown below support after the last high should be accompanied by increased volume.
Flag Pattern Trend Continuation Signal
Flag Pattern (Flag Pattern)
Continuation

The flag pattern is a short-term consolidation pattern that occurs after a strong trend, often acting as a brief pause before the trend resumes. Once the pattern is completed, the original trend is likely to continue.

Key Characteristics

  • Forms as a rectangular consolidation (flag) after a strong trend (flagpole).
  • Slightly slanted in the opposite direction of the prevailing trend.
  • Volume tends to decrease during the consolidation phase.
  • Breakout occurs with increased volume, confirming trend continuation.
Pennant Trend Continuation Signal
Pennant Pattern (Pennant Pattern)
Continuation

The pennant pattern is similar to the flag pattern but forms a triangular consolidation. After a strong trend, it briefly consolidates before breaking out in the same direction as the original trend.

Key Characteristics

  • Forms as a triangular consolidation after a strong trend (flagpole).
  • The upper and lower trendlines converge.
  • Volume tends to decrease during the consolidation phase.
  • Breakout occurs with increased volume, confirming trend continuation.
Symmetric Triangle ?
Symmetric Triangle (Symmetric Triangle)
Both Directions

The symmetric triangle pattern forms as the highs become lower and the lows become higher, causing price convergence. The breakout direction determines whether it signals a buy or sell.

Key Characteristics

  • The ascending and descending lines converge at a similar slope.
  • Trading volume tends to decrease as the pattern forms.
  • Breakouts often occur at 75-80% of the triangle formation.
  • Volume increase should be confirmed in the breakout direction.