WHAT ARE CHART PATTERNS

CHART PATTERNS

Chart patterns are simply defines as pictures or formations made by the price movement of the stocks. Chart patterns are the foot prints of of the bulls and bears of the stock market.

Chart patterns are analysed by looking at support, resistance  and trendlines.  Accordingly traders attempt to  recognize the trend early by analysing chart patterns.

      Chart patterns also help traders  to determine market direction and in timing their entries and exits. Chart patterns provide us concise picture of all the buying and selling force active in the market.

TYPES OF PATTERNS

Chart patterns are classified into two categories

REVERSAL PATTERN

CONTINUATION OR CONSOLIDATION PATTERN

REVERSAL PATTERNS

Reversal patterns are chart formation that indicate a reversal in the direction of the ongoing trend. Reversal patterns are chart patterns which reverse the trend of a stock once the pattern is confirmed. Reversal patterns include all of the patterns listed below. These  patterns can be spotted on the daily, weekly or monthly charts.

 Reversal can be either direction , i.e. from up to down or from down to up.

       COMMON FEATURES OF REVERSAL PATTERNS

A prerequisite for any reversal patterns is the existence of  a prior trend. A market must have something to reverse.

 The breaking of the important trend line is often the first signal of an impending trend reversal.

The greater the height and width of a reversal pattern , the more powerful would be the resultant move following a breakout from the pattern.

        VOLUME

If the price breakout from the pattern is not accompanied by higher than average volume, the probability of it being a false breakout should be considered quite high.

         REVERSAL PATTERNS

HEAD AND SHOULDER

INVERTED HEAD AND SHOULDER

DOUBLE TOP

DOUBLE BOTTOM

ROUNDING TOP

ROUNDING BOTTOM

TRIPLE TOP

TRIPLE BOTTOM

       CONTINUATION  PATTERNS

Continuation refers to the resumption of the trend after a consolidation  or pattern of indecision. Continuation patterns are chart patterns which set up the stock for a follow through move in the direction of the prior trend.

 Continuation patterns are:

 TRIANGLES

  WEDGES

  FLAGS

  PENNANTS

  RECTANGLE

       TYPES OF TRIANGLES

a  . SYMMETRICAL TRIANGLE

b. ASCENDING TRIANGLE

c. DESCENDING TRIANGLE