Stock chart patterns are the most important and powerful asset for any trader and technical analysis.
By learning from the patterns, the traders or the investor will be able to know about the profit from breakouts and reversals; it becomes a powerful tool for the investors.
Why is the stock pattern so important?
As we start from the basics, stock patterns are the way of seeing a series of price actions during the trading period. It can be at the time monthly, weekly, daily, and intraday.
These stock chart patterns are going to repeat themselves repeatedly, and due to this, it helps traders.
In this, if you recognize the patterns at the beginning, it will help you gain an advantage in the real markets. As a technical trader, you must know about the volume, support and resistance levels, RSI and Fibonacci Retracements that also help you to analyze the stock chart patterns and contribute to the real markets.
Which stock chart pattern should I look for?
As a beginner, you must see the common stock chat patterns that help you to gain a profit.
Here is some stock charts pattern to analyse the trading let’s see.
List of 10 Stock Chart Patterns
- Cup with Handle
- Ascending Triangle
- Falling Wedge
- Bearish Symmetrical triangle
- Double Top
- Rounding Bottom
- Descending triangle
- Inverse Head and Shoulders
As in Technical analysis, a pennant is created when there is a large movement in security, known as a flagpole, followed by a period of consolidation.
The pennant makes a shape due to converging lines. A movement breakdown develops in the same direction as the large initial movement representing the second flagpole.
In the above image, the flagpole represents the previous trend higher, so the trader goes to the upper trend from the breakout in the line of symmetry.
Cup with Handle
A cup with a handle stock chart pattern is a curved u shape pattern that handles the slopes slightly downwards.
In general, the low trading volume has the right-hand side of the diagram, lasting from seven weeks up to 65 weeks.
The triangle appears during the upward trend and is regarded as a continuation pattern.
It is created as part of the downward trend and is commonly a continuation.
Ascending triangles are always bullish patterns in how many times they occur.
A falling wedge is a bullish continuation or reversal pattern, depending on the wedges.
Wedges are like triangles, but there is a slight difference in the slope counter to the previous trend.
An uptrend falters, and the falling wedges have a series of lower highs and lower lows, which has lower highs that creates the wedges more of a triangle shape.
Bearish Symmetrical triangle
The symmetrical triangle is easy to spot in the patterns. They have a distinctive shape developed by the two trendlines converging.
The pattern created by drawing trendlines connects the series of peaks and troughs. The trendlines create the barrier; once the price breaks through these, prices are very sharp.
The double-top stock chart pattern is the bearish reversal pattern with two peaks or highs that are the same as the price level.
It is typically for the uptrend long, representing an M shape. The head and shoulder patterns are similar, but the twin top of the double top instead of three peaks with the head and shoulder pattern.
A flag stock chart pattern that is from by the rectangle. It develops from the two trendlines: support and resistance, until the price breaks out.
It has sloping trendlines, and the slopes should move in the opposite direction to the original price movement once the price breaks through the support or resistance lines, representing the buy or sell signal.
Rounding Bottom stock chart patterns are called saucer bottom, representing the long-term investment.
It shows the stock is moving from a downward trend to an upward trend.
It has a duration of several months to years which is like the cup and handle.
The descending triangle is the continuation pattern, a bearish pattern created during a downward trend.
It is seen as a reversal during an upward trend opposite the ascending triangle.
Inverse Head and Shoulders
The inverse head and shoulder are the stock chart pattern used to predict the reversal of the downward trend. It has one peak forming the head and the other two creating the shoulder.
As you understand about the stock chart patterns then you will trade on the real market. From this you will gain and make profit.
Frequently Asked Question
Q1. In which direction does the ascending triangle pattern trade?
The ascending pattern is a continuation pattern, with the breakout pattern typically occurring in the direction of the overall trend.
Q2. How many types of stock chart patterns are there?
There are more than 35 stock chart patterns.
Q3. Which is the strongest stock chart pattern?
It is identified by the trader’s preference and methods.