Price pattern explains about the movement of price as well as trend between rising and falling trends. Price patterns can appear on any charting period, 1-30,1-4hr, daily, weekly or annual charts. The price patters generally using for analysis are: (a) Double bottom, Doutble top, Head and shoulder,CUP pattern, Flag pattern, Triangle pattern. Volume is so important in determining most of the price patterns. It explains the entry, exit and stop loss.
Trendlines
Since price patterns are identified using a series of lines and/or curves, it is helpful to understand trendlines.
(a) Uptrends occur where prices are making higher highs and higher lows. Up trendlines connect at least two of the lows and show support levels below price.
(b) Downtrends occur where prices are making lower highs and lower lows. Down trendlines connect at least two of the highs and indicate resistance levels above price.
(c) Consolidation, or a sideways market, occurs where price is oscillating between an upper and lower range, between two parallel and often horizontal trendlines.
Continuation Patterns
A price pattern that denotes a temporary interruption of an existing trend is known as a continuation pattern. E.g. Flag pattern
Reversal Patterns
A price pattern that signals a change in the prevailing trend is known as a reversal pattern. Example:-
(a) Head and Shoulders, signaling two smaller price movements surrounding one larger movement
(b) Double Tops, representing a short-term swing high, followed by a subsequent failed attempt to break above the same resistance level
(c) Double Bottoms, showing a short-term swing low, followed by another failed attempt to break below the same support level
, , Price Patterns, neckline
