Price patterns, though derived from Dow theory, are more clearer and efficient in predicting the market than their forefather. They are used to describe the nature and characteristics of the market. Price patterns can be used for both short term trading and long term investment. Price patterns are nothing but shape formation in a chart. They are named according to their shape.
Popular price patterns are: Double Top, Double Bottom, Flag, Triangle, Head and Shoulders and Cup. Among them Flag, Inverse Head and Shoulders, Cup Or the Round Bottom , Double Bottom are bullish, whereas Head and Shoulders, Double Top , Inverse Cup are Bearish. Triangle can signify any of the either. For all the bullish patterns, volume should be high at the beginning and low at the end. For all the bearish patterns, volume should be low at the beginning and high at the end. Every pattern has its minimum time duration. For Flag rectangle, it is 4 – 7 days, Double top and Double Bottom, it is 20 days, Head and Shoulder it is 30 days for a part, Triangle it is 45 days and for the Cup , it is years along.