Chart patterns

The head and shoulders is the most famous reversal pattern. It forms three peaks: a higher middle peak (the head) flanked by two lower peaks (the shoulders), all sitting on a shared support line called the neckline. It tells a story of buyers making one last failed push to a new high before momentum collapses.

The trade triggers when price breaks down through the neckline — that's the confirmation the topping process is complete. The inverse head and shoulders does the same in reverse to mark bottoms. A rough target: measure the height from head to neckline and project it down from the breakout point.

Simpler and very common are double tops (an 'M' shape) and double bottoms (a 'W'). A double top forms when price hits a resistance level twice and fails both times — buyers couldn't make a higher high, so the uptrend stalls. The pattern confirms when price breaks the low between the two peaks.

Double bottoms are the mirror at support and often mark the end of downtrends. Because they only need two touches, they appear more frequently than head and shoulders, making them a workhorse reversal pattern for swing traders.

Continuation patterns are pauses within a trend — the market catching its breath before resuming. Triangles form as a range coils tighter and tighter, the highs and lows converging, energy building until price breaks out in the prevailing direction. Symmetrical, ascending, and descending triangles each have a slight directional bias.

Flags and pennants appear after a sharp move (the 'pole'): a brief, small consolidation that slopes gently against the trend, then a breakout that resumes the original thrust. They're a gift — a chance to join a strong trend you missed, with a tight stop just outside the pattern and a measured target equal to the pole's length.

Every pattern fails sometimes — they are probabilities, not promises. The disciplined approach is to wait for the breakout to actually confirm (a decisive close beyond the pattern boundary) rather than front-running it inside the shape and hoping. Anticipation feels clever but gets punished by the many patterns that never complete.

Two habits sharpen your results: measure the pattern's height to set a realistic first target, and watch volume — genuine breakouts usually come with a surge in participation, while breakouts on fading volume often fail and reverse straight back into the pattern.