Dow theory helps to identify trend of the market whereas price pattern gives us idea of price behavior to conclude potential break out and exit and entry levels.Double top in a chart is an M shaped pattern occurring over a period of time (approx 3 months). If the low of M breaks through the support with high volume, stock is expected to fall further. Double top pattern always refers to start of bearish trend.Double bottom in a chart is an W shaped pattern occurring over a period of time (approx 3 months). If the low of W breaks through the resistance with high volume , stock is expected to increase further. Double bottom, pattern always refers to start of bullish trend. Cup Pattern will look like as half of the circle. It happens after very long period of time. More the time horizon, more the chances for break out. Conditions for bullish trend: 1 ) There should be cup like shape in price pattern 2) Price should break neck line. 3) Volume should be high while break out.
Flag pattern is price pattern that looks like a flag with a pole. Flags result from price fluctuations within a narrow range and also known as consolidation period before upcoming rally.
Conditions to qualify as perfect Flag :
Formation of a steep pole.(75 to 80 degree approximately) The price movement in the sideways forming a rectangle by connecting highs and lows of both side. Takes lesser time to form. (4 to 7 days), Break out above that rectangle.There should be a high volume during break out.
