Chart Pattern 3

 14) Flag Pattern

Flag patterns are similar to pennant patterns but are often smaller. This technical analysis tool provides traders with the advantage of low-risk investments associated with quick profits. Flags appear throughout the price highway, you find them in fast-moving environments where the stock or index moves several points over a few days, then the price stops at the flag and then continues to move in the same direction. Of course, eventually, the price reverses directions, so it's important to hold the flag at the right point.

Like the pennant, the flag pattern is based on the market price consolidation of a particular stock. The consolidation will have a narrow range and will only be followed by a quick upward move. Like the pennant, this pattern has a flag "pole", which may represent a vertical price movement. These fluctuations can be bearish or bullish and can give an investor a huge advantage if you know how to spot these patterns.

For bullish patterns, the start will start with a sudden spike that can take many investors by surprise and cause a volume frenzy as many are trying to buy before and during an investment wave. After a while, the price will peak and reverse slightly, giving the appearance of an inclined rectangle. A breakout occurs when the resistance trend line is broken when prices begin to rise again and then another breakout occurs as an explosive price shift as the accelerated trend continues upward.

The bearish pattern is simply the reverse of the flag pattern, indicating a panic price decline with an almost vertical initial decline. This time, when the trend line breaks, it will induce panic selling to bring another downward-pointing leg into the pattern. In terms of how sharp the decline is on the flag, it is also an indicator of how bearish the pattern will be, and a wise investor will act accordingly.

Understanding the Flag Pattern  

Flags are short-term technical analysis that typically lasts less than 21 days. In many cases, the formation may take only 3 to 4 days, appearing as a horizontal rectangle, then out of nowhere quickly moving up. Reliable flags appear during fast, quick price action. Patterns can be up or down, but prices tend to rise or fall very quickly, moving at many points over a short period of time. The volume also usually decreases during formation but this is not always the case.

If you think you have seen a flag to trade, the most important factor is the increasingly bullish price trend. If the price action is slowly moving up and down in the form of a flag, then it is better for you to look elsewhere.

Pattern Type: Continuity 

Sign: Bullish 

Confirmation of Breakout: This pattern is confirmed when the stock or index closes above a higher trendline with above-average volume.

Measurement: Take the distance between the last steep move in the flag, and then add that amount to the breakout.

Volume: Volume declines during formation, and expands on breakout. Flag patterns and technical analysis are used to identify a possible continuation of a previous trend when the price moves against the same trend. When the trend resumes, the price move should accelerate, making the trade more profitable, taking into account the flag pattern, and this is a breakout. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader. 

 15) Pennant Pattern

Traders pay close attention to pennants and flags while trading. The two are very similar in terms of structure, and it may take some practice before an investor can easily tell the difference between the two. These short-term patterns that last only two to three weeks in length may be indicated by an initial significant volume move followed by a tapered-off period. Then there is a breakout and finally another strong volume move.

Investors can use this pattern to help gauge how high a stock will be by taking the price below the "flag pole" in the initial pattern, then waiting until the price consolidates. Once consolidated, the stock or index will break out at a slightly higher level, and if you take the bottom price and add it to the break-out price, it will give an excellent indication of future price action for the pattern.

For example, if you have a stock that was priced at $10 based on a "flag pole" and went aggressively to $20, then consolidated to $18.50, where it stood briefly before breaking out at $19.00. sits for. Investors can find an estimated top for this pattern by taking an initial $10 and adding it to $19.00, which gives a target of $29.00 to hit the price on this stock for this particular pattern. Typically, investors will use this pattern in conjunction with other indicators to increase their chances of an accurate forecast.

Most traders do not use pennants on their own but combine them with other technical analysis indicators so that they are not faked or duped into making bad trades. 

Pennants are short-term technical analysis that typically lasts less than 21 days. In many cases, formation may take only 3 to 4 days. Anything that takes longer than 21 days is classified as a symmetrical triangle or a falling wedge.

To identify the Ensign pattern, look for a fast, fast-acting price action leading up to the pattern. This feature is important because it helps to make the pendant easier. Fixed price direction can be up or down but in the short term, many points need to be moved.

Pattern Type: Continuity

Indication: bearish or bearish 

Breakout Confirmation: This pattern is confirmed when there is a close above the upper trendline drawn on a high for a bullish pennant below the lower trendline for a bearish pennant with above-average volume.

Measurement: Take the distance between the last steep move in the pennant, and then add it to the breakout level.

Volume: Volume declines during formation, and expands on a breakout. 

The top-performing pennants are those with breakouts near annual lows. Many traders use pennants in conjunction with other chart patterns or technical indicators that act as additional confirmations. For example, the relative strength index (RSI) and balance volume pair well with pennants to establish oversold levels during the consolidation phase, which can be used to predict run-ups or breakouts in a stock or index. can be done. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader.

 16) Head and Shoulders Top Pattern

A head and shoulders top pattern is one that has three peaks and looks like a head and shoulders because the two outer peaks are similar in height, yet smaller than the middle peak. This pattern is typically associated with a bullish bearish trend and thus is considered very reliable in its ability to predict stock action. This pattern is one of several top-notch patterns used to predict the end of a bull market and the beginning of a bearish one.

This head and shoulders top pattern occurs when a stock climbs to its peak and then falls back to the point before the uptrend. Then the stock will move upward once again, but this time it will cross the previous spike and is called the "nose", and then it will once again move upwards and downwards. Once again, there will be an upward tick that reaches the same level on the first spike and then drops downward. This last downward tick is usually significant as it is at this point where the bulls turn to the bears.

If you become very good at reading this pattern, you can immediately see the gains an investor can make. Selling your stock at the point where the "nose" has reached its peak would be an excellent idea, especially if you bought your stock at one of those points based on the pattern. Buying below, then waiting for the "heads" to appear, will give you the opportunity to profit from this market trend before it turns bare. This will give you a significant advantage over other investors who may not be able to predict the downturn in the times to come.

The head and shoulders top pattern is formed when the price of a stock or index peaks and then suddenly reverts based on the previous move. It will then rise above the former summit to form the head, and then return to base level once again. Then, in a final move, the stock or index will rise again, but only to the level of the first peak of the formation, which is where it will last travel back up to the baseline.

Is there a support break here that indicates a renewed desire to sell the stock or index at lower prices? This decrease in price indicates an increase in supply with an increase in quantity. This fierce combination can trigger a powerful downward move that eliminates any chances of the stock returning to the previous support level. 

Pattern Type: Reversal

Hint: Bearish 

Breakout Confirmation: This pattern is confirmed when there is a close below a horizontally drawn lower trendline at an intermediate low with above-average volume.

Measuring: Take the distance from the top of the head to the bottom half, then subtract that amount from the neckline at the breakout. 

Volume: Volume increases during the initial shoulder upward formation, then decreases as price exits the left shoulder. The volume will then balance out during the formation of the head, only to rise again as the price breaks below the bottom support level. 

The head and shoulders top pattern is one of the most recognizable technical charts. The left and right shoulders should be roughly the same height and width, but they may be slightly staggered. It is important to understand that the pattern is followed by an uptrend and usually a significant reversal in a stock or index. To confirm that pattern it is necessary to identify the neckline and volume at the break. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader.

 17) Inverse Head And Shoulders Pattern

The inverted head and shoulders pattern indicates a movement towards a bullish trend and is an excellent indicator for traders who know how to spot the pattern, allowing them to capitalize on a bullish trade. Similar to "triple bottom", the only exception is that the "head" is lower than the other two points, making this inverted head a shoulder.

The pattern can be recognized when the price of a stock falls into a trough and then rises, then falls below the most recent trough, and then rises again. Eventually, the price falls back but not as deep as last time. Once the last trough is formed, the price action moves upwards toward the resistance level and breaks out.

This pattern is just the opposite, with the traditional reversal head and shoulders pattern indicating a move to the bearish zone. However, this pattern may also tell you some things you want to know that it doesn't have an equivalent. For example, this pattern can indicate how strong a bullish run will be if you read it correctly.

If you look at the chart stretch coming before the formation of the head and shoulders pattern, a long stretch could be a sign of a strong bull movement, while a short one could mean that you have to move before the bulls return. Must get in and out quickly. , Furthermore, if the lead in the head and shoulders pattern is abrupt, it could also indicate a more definite bullish trend.

A head and shoulders pattern with a downward-facing neckline can also indicate a better performance than one without this movement. In addition, if the "left shoulder" of the pattern is high, it may also mean that the pattern will perform better than those with a high "right shoulder".

When executing the inverse head and shoulders pattern, stop loss orders should be placed slightly below the neckline in anticipation of a breakout. Those looking to trade more aggressively can place their stop-loss orders below the right shoulders of the inverse head and shoulders pattern.

Traders should be wary of this pattern as, after the initial decline, when the first shoulder is formed, bears will enter the market and try to push the stock price down even further. If they succeed, they may continue to hold their control, forcing an extended downtrend.

The first and third Dundas are considered inverted shoulders, while the second is considered inverted heads. Traders who identify the pattern enter a bull position when the price moves above the upper resistance level, which is followed by the right inverted shoulder. Once the Stocker Index moves above this level, it indicates a bullish move. An increase in volume also confirms the breakout.

How long the bull run will last can be determined by measuring the distance between the bottom of the head and the neckline, the same distance as when the stock or index moves up on a breakout.

Pattern Type: Reversal 

Sign: Bullish 

Breakout Confirmation: This pattern is confirmed above the upper trendline with above-average volume. 

Measurement: Take the distance between the first high and low of the head and then add it to the upper resistance level on the breakout.

 Volume: Volume has a tendency to increase, causing a shoulder downward movement first, then falling as prices rise. Volume is balanced out during the formation of the head and rises when the price breaks above the resistance level on the other shoulder.

The inverted head and shoulders are one of the most familiar charts in technical analysis. It is a favorite among many traders because of its strong and firm signals. However, one should be cautious and wait for a confirmation, a breakout above the neckline, before executing a bullish trade. It is also always recommended to get additional confirmation from other technical techniques. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader.

18) Rounding Bottom Pattern

Rounding bottom patterns sometimes referred to as "saucer bottom" patterns are known to be able to predict a longer-term uptrend. Similar to the cup and handle pattern, only without the hassle of a temporary downward trend that creates a "handle". The pattern is a long-term reversal pattern that is best applied to a weekly chart representing a consolidation. It changes from bearish to bullish.

This circular bottom pattern can be seen at the end of a disappointingly long downward trend. The time frame for this pattern can be weeks, months, or even years in length, and is considered one of the more rare patterns to form in the market. Most of the time, this pattern indicates that a prolonged downward trend, often caused by an oversupply of stocks, is coming to an end as investors begin buying at lower price points, reversing the downward movement. Once this is triggered, it generally increases demand and drives up the price of the stock.

This allows the stock to "break out" and initiate a long-lasting and positive reversal that investors can take advantage of if they choose to be one of those people who buy short and hold onto the stock for some time. Willing to sit till it pops up again. This is because the length of time for recovery can vary, and it can take a long time to find its peak. Investors should be prepared for this long period and should be patient till the price rises.

The rounded bottom pattern looks similar to the cup and handles pattern but without the brief downward trends represented by the handle. An initial drop of a round bottom indicates that there is too much supply coming into the market, which pushes the stock or index down. Here traders begin to realize that the stock is trading at a discount, and buyers start entering the market at the discounted price. This increase in demand then pushes the stock higher as demand continues to increase.

As the rounding bottom completes its formation, the stock breaks out of a full bullish pattern. The whole process is indicative of a shift from bearish to bullish in the sediment by investors, which increases the momentum upward. Although the pattern has a high success rate, it is quite rare compared to other technical analysis charts.

Pattern Type: Continuity

Sign: Bullish 

Breakout Confirmation: When there is above-average volume, and the stock closes above the lip of the rounding bottom.

Measuring: The price target is achieved by measuring the distance between the highest high and the lowest low and then adding it to the breakout level.  

Volume: The rounded bottom shape has an increase in volume, balanced during the middle, with volume increasing to the right, which continues on the breakout.

The rounded bottom pattern is given by the visual resemblance to what looks like a bowl. It represents a gradual price shift by investors from bearish to bullish. The pattern is best confirmed by volume, which confirms a rounding bottom by high volume during a decline, then flat volume during the mid-range, and again high volume when the price rises. Traders were able to successfully identify the rounding bottom should they expect an upward price action equal to the size of the pattern. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader.

 19) Price Channel Pattern

Used by traders for technical analysis-based trading, a price channel is a continuation pattern in which the price bounces between parallel resistance and support lines. Resistance and support lines can move horizontally, downward (bearish), or upward (bullish). One of the best things about the price channel pattern is that it doesn't matter whether you are looking at the daily chart or if you are a long-term trader, this chart pattern works with any trading time frame.

The first line drawn in a price channel chart is called the main trend line. To illustrate this line, an analyst should identify that there should be two lows in the case of a bullish price channel, and two highs in the case of a bearish price channel. The second line drawn in the chart pattern is called the channel line. The channel line requires a higher or lower, the amount of which depends on the analyst - some use two points while others use only one as price movement moves through the trading channel.

In the case of a bearish price channel, the trend remains bearish if the price moves down while staying within the descending channel lines. Signs of a change in direction include price not meeting support levels. If the price follows the first signal with a move above the resistance, it is another sign of a change. If the price breaks the support, traders can expect a sharp drop in the price.

The bullish channel is the opposite of the bearish channel. Here the trendline moves through the ascending channels while the price action remains within the channel resistance levels. If the price does not reach the resistance and breaks below the support then the trend may change. Similarly, a break above resistance is considered bullish. Price channel analysis is a flexible approach to trading because the placement of the two trend lines is up to the trader - they may prefer the exact price and line connection or tolerate margin.

Horizontal channels also exist but are more challenging for traders who are not actively looking for them. A horizontal channel tends to move sideways in a rectangular formation. Buying and seller pressure strikes an equilibrium that forces price movement sideways through parallel lines. A new high in price above the upper resistance level represents a buying opportunity. A new low in price below the lower support level represents a technical sell signal.

A stock or security travels through a price channel when the underlying price is buffered by the forces of supply and demand, which can be downward, upward,  or sideways. The culmination of all these factors pushes the price movement into a tunnel-like trending movement. When there is excess supply, the price channel moves downward, when there is excess demand, the price channel moves upward, and if there is an equal balance of supply and demand, the price channel moves sideways. Is.

Traders typically look for stocks that trade within a price channel. When the stock is trading at the upper end of the price channel, it indicates that the stock will likely trade back to the center, and when the stock is trading at the lower end of the price channel, it suggests that the stock will be trending. The probability is higher.

Price channels are also useful when identifying stocks that are about to break out, which is when a stock breaks an upper or lower trendline. If the price action breaks above the upper trend line, it is likely that the stock will have an upside breakout. If the stock breaks the lower trendline, traders expect a downside move.

A trader can see a price channel pattern if they can see at least two higher highs and higher lows. The trader then draws a line connecting the high and low to form a price channel pattern.

No matter which price channel you are dealing with, once you notice two highs that fail to reach the top of the price channel pattern, the price will soon break down. Similarly, once you see two lows that fail to reach the bottom of the price channel pattern, the price is likely to break out of the upside. The larger the gap between the price breaks in the resistance line, the more likely the trade is to be established.

Once the price breaks through one of the horizontal channels, the breakout is confirmed. One of the worst mistakes a trader can make is to enter a trade before the price has entered one of the channel lines. Entering a trade too early can cause the price to return within the channel, so it is always necessary to wait for the breakout to be confirmed and for a break above an upper resistance level or a break below a lower support level. 

Pattern Type: Continuation or Reversal

Indication: bullish or bearish

Breakout Confirmation: This pattern is confirmed when the stock or index closes higher above the upper trendline or breaks below the lower trendline with above-average volume.

Measurement: middle of the last steep move Take the distance to the last push before the breakout, and then add that amount to the breakout.

Volume: Volume declines and rises during formation, but will expand upon breakout.

The price channel tells traders where a stock or index is likely to bounce around within a specific trading range. Once it breaks the upper or lower trendline, a breakout of the underlying is expected. On the upside, intense buying pressure will prompt the stock to gain higher highs, while a breach on the downside will show weakness, pushing the stock lower. Understanding the price channel allows analysts to determine which major forces are likely to win, increase selling pressure, or buy pressure. To learn more about stock chart patterns and to fully take advantage of technical analysis, be sure to check out our complete library of predictable chart patterns. These include comprehensive descriptions and images so that you can identify important chart pattern scenarios and become a better trader.