important chart patterns Flashcards
what does a double top pattern often indicate?
it often indicates an upcoming trend reversal as it is telling us buying pressure is just about finished
what type of pattern is this and what does it indicate?
a head and shoulders pattern often indicates a trend reversal
typically, if the slope of the neckline in a head and shoulders pattern is steeper, it produces a ____ reliable signal (more/less)
more
what should you measure in a head and shoulders (or inverted head and shoulders) pattern to get an estimate of how much the price will approximately move?
the distance between the head and neckline
what type of pattern consists of two trend lines converging and signaling a pause in the current trend?
wedge chart patterns
when a rising wedge forms after a downtrend, it usually indicates a ____?
continuation of the down move
when a rising wedge occurs after an uptrend, it usually indicates_____?
a bearish reversal
what type of chart pattern is this, and what is it indicating?
a rising wedge after an uptrend indicates a bearish reversal
what does this chart pattern indicate?
a rising wedge after a downtrend indicates a continuation
what is this chart pattern and what does it indicate?
a falling wedge after a downtrend indicates an uptrend might occur
when a falling wedge occurs after an uptrend, it usually indicates what?
the trend will resume later on
what is the type of chart pattern formed when the price is bounded by parallel support and resistance levels?
a rectangle
if a rectangle forms after a downtrend, where will price likely go after it breaks out?
back into a downtrend; it had to consolidate and “catch its breath.”
price usually falls by the same height as when it fell into a rectangle chart pattern
what chart pattern is formed when buyers or sellers pause to catch their breath before taking the pair in the same direction? (it is a tiny symmetrical triangle)
penants
where will price go?
a bearish pennant indicates price will continue down
when does a triangle pattern form and what does it represent?
it represents a continuation
they form when it includes at
least 5 touches of support and resistance (ex: 3 touches of support line and 2 resistance line)
when does a symmetrical triangle form and what does it represent?
it forms where the slope of the prices highs and the slope of the prices lows converge together to a point where it looks like a triangle
the market is making lower highs and higher lows; it is a type of consolidation
as the slopes get closer to each other, it means a break out is going to happen
when does an ascending triangle occur and what does it represent?
when there is a resistance level and a slope of higher lows; buyers are not able to exceed this level, but are gradually pushing the price up as evidenced by the higher lows
either they will be able to break through, or the resistance will be too strong; you need to be ready for either
what type of triangle pattern consists of lower highs?
a descending triangle;
MOST of the time the price will eventually break the support line and continue to fall, but sometimes it will be too strong and it will make a strong move up
reversal patterns:
continuation patterns:
bilateral patterns: (price can move either way!)
what does bilateral mean when talking about chart patterns?
price can move either up or down
whenever price breaks out to the upside in a bullish rectangle, how far does it usually go in comparison to the rectangle?
it’s about the same size as the rectangle
where is a reasonable place to put your stop when using chart patterns?
around the middle of the original formation
triple top pattern!!!
