Reference Shelf · Reference 6 of 8
Poster: Chart Patterns
Continuation and reversal patterns — shape, bias, and the trigger.
Larger shapes price draws over many candles. A bias is which direction the pattern leans. The trigger is the price break that says the pattern is actually in play — no break, no trade.
Continuation Patterns — the trend takes a breath
| Pattern | Shape in words | Bias | The trade trigger |
|---|---|---|---|
| Bull Flag | Sharp rise (the pole), then a small downward drift in a narrow channel | Up | Break above the flag's top edge |
| Bear Flag | Sharp drop (the pole), then a small upward drift in a narrow channel | Down | Break below the flag's bottom edge |
| Pennant | Sharp move, then a tiny triangle that squeezes tighter | Same way as the move before it | Break out of the little triangle |
| Ascending Triangle | Flat top (resistance), rising bottom (higher lows) | Up | Break above the flat top |
| Descending Triangle | Flat bottom (support), falling top (lower highs) | Down | Break below the flat bottom |
| Symmetrical Triangle | Both sides squeeze toward each other | Follows the prior trend | Break of either edge, with the trend |
| Rectangle | Price bounces sideways between flat support and resistance | Same way as the move before it | Break of support or resistance |
Reversal Patterns — the trend may be ending
| Pattern | Shape in words | Bias | The trade trigger |
|---|---|---|---|
| Head & Shoulders | Three peaks; the middle is tallest; a neckline connects the dips | Down after an uptrend | Break below the neckline |
| Inverse Head & Shoulders | Head & Shoulders flipped upside down | Up after a downtrend | Break above the neckline |
| Double Top | Two peaks at about the same price — an "M" | Down | Break below the low between the peaks |
| Double Bottom | Two dips at about the same price — a "W" | Up | Break above the high between the dips |
| Triple Top | Three peaks at about the same price | Down | Break below the lowest dip between peaks |
| Triple Bottom | Three dips at about the same price | Up | Break above the highest peak between dips |
| Rising Wedge | Price climbs but the swings get narrower, leaning up | Down | Break below the wedge's lower edge |
| Falling Wedge | Price falls but the swings get narrower, leaning down | Up | Break above the wedge's upper edge |