In this section we have studied about the various price patterns and how it differs from Dow Theory. We have also studied in detail about the individual price pattern and how to identify it in a chart.

  • : Double top, double bottom, Head and Shoulder, Cup pattern, Flag pattern and Triangle pattern
  • : Dow theory indicates the direction of trend in the market while the price pattern shows the characteristics of the market.
  • : Two equivalent tops and the gap between the tops should be minimum of one month and volume should be high at the second top
  • : Two equivalent bottoms and the gap between the bottoms should be minimum of one month and volume should be high at the second bottom
  • : It is distribution / accumulation pattern. It takes months of time to form.In this pattern the head is the tallest. It takes minimum 3 months to form and volume should be higher at the left shoulder and lower at the right shoulder.We can create short positions if it goes below the neck line.
  • : Inverted head and shoulder is same as head and shoulder but in inverted. head is at the lowest point. it will take minimum 3 months to form.
  • : It is an accumulation pattern. It is useful for long term investment. It takes longer duration to form.Cup pattern should be visible. co relation with the market movement should be low.Long position can be created when it is started getting filled.
  • : It has a steeper pole and a rectangular shape like the cloth of the flag. It usually appears at the early stages of the trend. It denotes the increase in momentum.Steeper pole should be spotted. Rectangular price movement takes 7 to 8 days to happen and volume should be low during flag.
  • : Entry price should be just after the break out Exit price should be just after the price movement has reversed the direction Stop loss at the point where the breakout gap is filled
  • : It is the strongest pattern to identify the strength of consolidation. It takes minimum 45 days to form.The line connecting the tops and bottoms to form a triangle. The volume should be high while giving breakout.Breakout can happen in any place top or bottom.
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