A price pattern is a recognizable configuration of price movement that is identified using a series of trend lines and/or curves.
Since price patterns are identified using a series of lines and/or curves, it is helpful to understand trend lines. Trend lines help technical analysts spot areas of support and resistance on a price chart. Trendlines are straight lines drawn on a chart by connecting a series of descending peaks (highs) or ascending troughs (lows). A trend line that is angled up, known as an up trend line, occurs where prices are experiencing higher highs and higher lows. Technical analysts have long used price patterns to examine current movements and forecast future market movements.
When a price pattern signals a change in trend direction, it is known as a reversal pattern where else a continuation pattern occurs when the trend continues in its existing direction following a brief pause.
- : 1. Double Top & Double Bottom Pattern 2. Triangle Pattern 3. Flag Pattern 4. Cup Pattern 5. Head & Shoulder Pattern
- : Price patterns indicates the price movement of a share whereas Dow theory indicates the market trend.
- : DOUBLE TOP: Two equivalent tops with minimum duration of 20 days with good volume. If the Volume is high and price is moving down the previous bottom, it is the bearish trend and we can go for Short position.
- : DOUBLE BOTTOM: Two equivalent bottom with minimum duration of 20 days with good volume. If the Volume should be high after the second bottom. Price goes up above previous top shows bullish trend and we go for Long position.
- : HEAD & SHOULDER: It is a pattern to determine the price. Right shoulder volume should be low as possible and if position is breaking down the neck line we can say it a Bearish trend.
- : It is a significant rally prior to Head and shoulder structure indicating trend reversal. When the volume is high and if it crosses above left shoulder and the prices goes in steep way, we can say it a Bullish trend.
- : Rounding bottom or cup bottom takes long time to construct. During rounding bottom, volume should be low. Bullish will maintain the volume and accumulation of stocks will be gradual.
- : FLAG PATTERN: A steeper pole pattern with rectangular shaped sideways. It takes 4-7 days. Generally sellers will not actively participate and suddenly volume is expected to be more during break out.
- : ENTRY PRICE: Entry Price is wait until the price has broken out of the Flag’s upper trend line in the direction of the original uptrend. EXIT PRICE: Place a exit order once the candle that has broken out of the flag pattern has completed. STOP LOSS: The stops loss for the bullish flag are placed just at the low prior to the break out from the bullish flag.
- : TRIANGLE PATTERN: When both buyers and sellers are aggressive triangle pattern is formed. The triangle area should be minimum of 1.5 months. Breakout is around 70% zone and volume is required to confirm the breakout.