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Chart patterns

Twelve well known formations, each with an animated sketch, the usual rule of thumb for the price target, the case where the breakout fails, and a worked example. Chart patterns describe how buyers and sellers have behaved recently. They aren't a forecast.

Read the lesson what chart patterns can do first. It explains why patterns look more convincing in hindsight than they are.

Reversal patterns

Patterns that appear at the end of a trend and can hint at a turn.

Head and shouldersThree highs, the middle one highest, with the neckline below.Inverse head and shouldersThe mirror image at the end of a decline.Double topTwo highs at a similar level, only the break below the valley counts.Double bottomTwo lows, only the breakout above the interim high counts.Rising wedgeRising prices with fading strength.Falling wedgeFalling prices with fading selling pressure.

Continuation patterns

Pauses in a move after which things often continue in the same direction, but not always.

Ascending triangleFlat ceiling, rising lows.Descending triangleFlat floor, falling highs.Symmetrical triangleTwo lines converge, the direction stays open.Flag and pennantShort pauses after a steep move.RectangleThe price swings between two horizontal lines.Cup with handleA rounded bottom, a small pullback, then the breakout.

All sketches use made up prices. The examples include fees, spread and also the case where the pattern doesn't work out. They're not a recommendation.