Patterns are the distinctive formations created by the movements of security prices on a chart and are the foundation of technical analysis.
A pattern is identified by a line that connects common price points, such as closing prices or highs or lows, during a specific period of time.
Technical analysts and chartists seek to identify patterns as a way to anticipate the future direction of a security’s price.
These patterns can be as simple as trendlines and as complex as double head-and-shoulders formations.