Price patterns used in technical analysis along with chart examples:
Head and Shoulders (Reversal): This pattern resembles a head with two shoulders. It indicates a potential trend reversal from bullish to bearish. The neckline is a support level that, once broken, confirms the reversal.
Inverse Head and Shoulders (Reversal): The opposite of the head and shoulders pattern, this one indicates a potential trend reversal from bearish to bullish.
Double Top (Reversal): Two swing highs at approximately the same price level with a dip in between signal a potential trend reversal from bullish to bearish. A break below the support level (trough) confirms the reversal.
Double Bottom (Reversal): Two swing lows at approximately the same price level with a rise in between signal a potential trend reversal from bearish to bullish. A break above the resistance level (peak) confirms the reversal.
Ascending Triangle (Continuation): A series of higher lows with a horizontal resistance line indicates a continuation of the uptrend. A breakout above the resistance level confirms the continuation.
Descending Triangle (Continuation): A series of lower highs with a horizontal support line indicates a continuation of the downtrend. A breakout below the support level confirms the continuation.
Cup and Handle (Bullish): Resembles a cup with a handle, where the cup is a U-shaped price pattern and the handle is a short, downward price movement. It indicates a potential continuation of the uptrend.
Flags (Consolidation): These are triangular shaped patterns that form during a consolidation period within an existing trend. Flags tend to have steeper trendlines, while pennants have trendlines that are more parallel. A breakout in the direction of the prior trend confirms the continuation.
It’s important to remember that chart patterns are not proof indicators and should be used in conjunction with other technical analysis tools for a more comprehensive understanding of the market.