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Chart Patterns

This document provides a comprehensive reference for technical chart patterns used in trading, including candlestick patterns, multi-bar formations, and classical chart patterns.

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Candlestick Patterns

Single and multi-candle formations that suggest potential price reversals or continuations.

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Bullish Reversal Patterns

• Hammer — Small body at top, long lower wick (2x body). Appears at bottom of downtrend.
• Morning Star — Three-candle pattern: large bearish, small body (gap down), large bullish.
• Bullish Engulfing — Bearish candle followed by larger bullish candle that engulfs it.

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Bearish Reversal Patterns

• Shooting Star — Small body at bottom, long upper wick. Appears at top of uptrend.
• Evening Star — Three-candle pattern: large bullish, small body (gap up), large bearish.
• Bearish Engulfing — Bullish candle followed by larger bearish candle.

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Continuation Patterns

• Doji — Open and close nearly equal. Signals indecision.
• Spinning Top — Small body with equal upper and lower wicks.

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Classical Chart Patterns

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Reversal Patterns

• Head and Shoulders — Three peaks with the middle peak highest. Neckline break confirms reversal.
• Double Top/Bottom — Two peaks/troughs at similar levels.
• Triple Top/Bottom — Three peaks/troughs at similar levels.

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Continuation Patterns

• Flags and Pennants — Short consolidation against the trend before continuation.
• Triangles — Ascending, descending, or symmetrical price compression.
• Cup and Handle — Rounded bottom followed by small consolidation before breakout.

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Breakout Patterns

• Rectangle — Price bounded between horizontal support and resistance.
• Wedge — Converging trendlines (rising or falling).

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Pattern Reliability

Pattern reliability varies significantly. Key considerations:

• Volume confirmation increases reliability
• Patterns on higher timeframes are more reliable
• Context matters — a hammer in an uptrend is less significant than in a downtrend
• Always combine patterns with other analysis (indicators, volume, support/resistance)