Chart Patterns

Two converging trendlines with lower highs and higher lows compress price into a tightening range. In an uptrend, the breakout typically resolves in the direction of the prior trend.

Entry

Daily close above the upper (descending) trendline on rising volume. Optional: wait for retest of the broken line.

Stop

Below the most recent higher low inside the triangle.

Target

Measured move = the height of the triangle at its widest point, projected up from the breakout.

Avoid

Breakouts within the last 20 percent of the apex are noise. If the triangle reaches the apex without breaking, skip the trade.

Same converging-trendline shape as the bullish variant, but inside a downtrend. The breakdown resolves in the direction of the existing trend.

Entry

Daily close below the lower (ascending) trendline on rising volume. Optional: wait for retest of the broken line.

Stop

Above the most recent lower high inside the triangle.

Target

Measured move = the height of the triangle at its widest point, projected down from the breakdown.

Flat horizontal resistance with rising lows. The repeated tests of resistance combined with higher lows show buyers gaining strength on every dip.

Entry

Daily close above the horizontal resistance on volume expansion.

Stop

Below the most recent higher low (rising support line).

Target

Measured move = height of the triangle (resistance minus the first low) projected upward from the breakout.

Flat horizontal support with descending highs. Sellers step in lower each time while buyers can no longer defend support; eventually support breaks.

Entry

Daily close below the horizontal support on volume expansion.

Stop

Above the most recent lower high (descending resistance line).

Target

Measured move = height of the triangle (first high minus support) projected downward from the breakdown.

A downtrend exhausts: a lower low (head) flanked by two higher lows (shoulders). The neckline through the two intermediate highs becomes the trigger for the reversal.

Entry

Daily close above the neckline on rising volume. Best: a small pullback retests the neckline as new support, then enter long on the bounce.

Stop

Below the right shoulder low.

Target

Measured move = distance from the head to the neckline, projected upward from the neckline break.

Avoid

Premature entry before the right shoulder forms is the most common failure. Wait for the right shoulder to complete and the neckline to break.

An uptrend exhausts: a higher high (head) flanked by two lower highs (shoulders). The neckline through the two intermediate lows confirms the reversal when broken.

Entry

Daily close below the neckline on rising volume. Optional retest of the neckline as new resistance gives a tighter entry.

Stop

Above the right shoulder high.

Target

Measured move = distance from the head to the neckline, projected downward from the neckline break.

A rounded base (the cup) followed by a small downward-sloping consolidation (the handle). Famous from Bill O'Neil's growth-investing playbook; works on multi-week to multi-month bases.

Entry

Daily close above the handle's upper trendline (which is also near the cup's resistance) on volume expansion.

Stop

Below the handle's low, or below the cup's right-side rim.

Target

Measured move = depth of the cup, projected upward from the breakout level.

Avoid

Handles that retrace more than 50 percent of the cup's depth invalidate the pattern. Pass.

Mirror of the cup and handle: a rounded top (inverse cup) followed by a small upward-drifting pullback (inverse handle). Resolves with a breakdown.

Entry

Daily close below the inverse handle's lower trendline on volume expansion.

Stop

Above the inverse handle's high.

Target

Measured move = height of the inverse cup, projected downward from the breakdown level.

Two converging trendlines, both sloping down, with the upper line flatter than the lower. The pattern looks like a downtrend losing steam; the breakout is bullish regardless of the prior trend.

Entry

Daily close above the upper trendline on rising volume.

Stop

Below the most recent low inside the wedge.

Target

Measured move = height of the wedge at its widest point, projected upward from the breakout.

Two converging trendlines, both sloping up, with the lower line steeper than the upper. Looks like an uptrend losing momentum; the breakdown is bearish regardless of prior trend.

Entry

Daily close below the lower trendline on rising volume.

Stop

Above the most recent high inside the wedge.

Target

Measured move = height of the wedge at its widest point, projected downward from the breakdown.

Price oscillates between parallel horizontal support and resistance for several weeks. In an uptrend, the breakout typically resolves with the prior trend.

Entry

Daily close above the upper horizontal level on volume expansion.

Stop

Below the most recent low inside the range, or below the broken resistance level.

Target

Measured move = the range height (resistance minus support), projected upward from the breakout.

Same parallel-channel shape as the bullish variant but inside a downtrend. Breakdown resolves with the prior trend.

Entry

Daily close below the lower horizontal level on volume expansion.

Stop

Above the most recent high inside the range, or above the broken support level.

Target

Measured move = the range height (resistance minus support), projected downward from the breakdown.

A strong directional move (the flagpole) followed by a tight, slightly down-sloping consolidation (the flag). Volume contracts during the flag, then expands on the breakout.

Entry

Daily close above the flag's upper trendline on volume expansion.

Stop

Below the flag's lower trendline.

Target

Measured move = the height of the flagpole, projected upward from the breakout point.

Avoid

Flags longer than 2 weeks lose their flagpole-projection edge - they become wider consolidations with different rules.

Mirror of the bullish flag: a strong down move (flagpole) followed by a tight, slightly up-sloping consolidation (flag), then breakdown in the original direction.

Entry

Daily close below the flag's lower trendline on volume expansion.

Stop

Above the flag's upper trendline.

Target

Measured move = the height of the flagpole, projected downward from the breakdown point.

Like a flag but with converging trendlines instead of parallel: a sharp move (pole) into a small symmetrical-triangle-style consolidation, resolving in the direction of the prior move.

Entry

Daily close above the pennant's upper trendline on volume expansion.

Stop

Below the pennant's lower trendline.

Target

Measured move = the height of the pole, projected upward from the breakout.

Mirror of the bullish pennant: a sharp down-move (pole) into a small converging consolidation, resolving with a continuation lower.

Entry

Daily close below the pennant's lower trendline on volume expansion.

Stop

Above the pennant's upper trendline.

Target

Measured move = the height of the pole, projected downward from the breakdown.

Two attempts to break support fail at roughly the same level, separated by an intermediate rally. The break of the rally's high confirms buyers are in control.

Entry

Daily close above the swing high between the two bottoms (the neckline) on volume expansion.

Stop

Below the second bottom.

Target

Measured move = distance from the bottoms to the broken neckline, projected upward.

Two attempts to break resistance fail at roughly the same level, separated by an intermediate pullback. The break of the pullback's low confirms sellers are in control.

Entry

Daily close below the swing low between the two tops (the neckline) on volume expansion.

Stop

Above the second top.

Target

Measured move = distance from the tops to the broken neckline, projected downward.

Avoid

If the second top exceeds the first by more than 1-2 percent, it is a higher high (continuation), not a reversal.

Three failed attempts to break support at the same level. Rarer than double bottoms but stronger when they form - the third defense exhausts sellers.

Entry

Daily close above the highest swing high between the three bottoms on rising volume.

Stop

Below the third bottom.

Target

Measured move = distance from the bottoms to the neckline, projected upward.

Three failed attempts to break resistance at the same level. Strong reversal signal; the third rejection exhausts buyers and the breakdown of the intervening lows confirms.

Entry

Daily close below the lowest swing low between the three tops on rising volume.

Stop

Above the third top.

Target

Measured move = distance from the tops to the neckline, projected downward.