Chart Patterns
Master the most reliable reversal and continuation chart patterns used by professional traders across all markets.
Overview
Chart patterns are geometric shapes formed by price action on a chart that signal potential future price direction. These patterns represent the collective psychology of market participants — the battle between buyers and sellers creating recognisable shapes that have been studied and traded for over a century. From head and shoulders reversals to flag continuations, chart patterns provide measured-move targets and clear invalidation levels for structured trade planning.
Topics Covered
Head & Shoulders
The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.
Double Top & Double Bottom
Double tops and double bottoms are two-touch reversal patterns that form when price tests the same level twice and fails to break through. A double top signals bearish reversal after an uptrend, while a double bottom signals bullish reversal after a downtrend. The pattern is confirmed when price breaks the support or resistance level formed between the two peaks or troughs.
Cup & Handle
The cup and handle is a bullish continuation pattern resembling a teacup when viewed from the side. The cup forms as a rounded bottom with the left and right rims at approximately the same level, followed by a small downward-drifting consolidation (the handle). A breakout above the handle's resistance triggers the measured move, calculated from the bottom of the cup to the rim.
Rising & Falling Wedges
Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Bull & Bear Flags
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.
Pennants
Pennants are short-term continuation patterns that form after a strong directional move. They resemble small symmetrical triangles, with converging trendlines creating a compact consolidation zone. Unlike flags, which have parallel channels, pennants converge to a point. The breakout typically occurs in the same direction as the preceding move, with the measured target based on the flagpole.
Diamond Patterns
Diamond patterns are relatively rare reversal formations that combine a broadening pattern followed by a symmetrical triangle, creating a diamond-shaped outline on the chart. They typically appear at market tops (diamond top) or, less commonly, at bottoms (diamond bottom). The pattern signals an exhaustion of trend momentum as volatility first expands then contracts before a decisive breakout.
Rectangle Patterns
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Rounding Bottom
The rounding bottom (also known as a saucer pattern) is a long-term bullish reversal formation characterised by a gradual, U-shaped transition from a downtrend to an uptrend. The pattern reflects a slow shift in sentiment from bearish to neutral to bullish, typically forming over weeks or months. A breakout above the pattern's resistance (the left rim level) confirms the reversal.
Triple Top & Triple Bottom
Triple tops and triple bottoms are reversal patterns where price tests the same level three times before reversing. They are essentially double tops and bottoms with an additional test, making them rarer but potentially more significant. The three-touch structure confirms that a price level is acting as a strong barrier, and the eventual break of the pattern's support or resistance level triggers the reversal.