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 Technical Analysis - PATTERNS High Profitable
1 Head & Shoulder
2 Inverted Head & Shoulders
3 Double / Triple Tops
4 Double / Triple Bottoms
5 Triangles
[Link]

- Ascending Triangle
- Descending Triangle
- Symmetrical Triangle
PATTERNS

- Diamond
6 Channels
- Ascending Channel
- Descending Channel
- Horizontal Channel
7 Flags – Bullish/Bearish
8 Wedges / Pennants
9 Cup & Handle
10 Rounding Top
CLASSICAL CHART PATTERNS 11 Rounding Bottom

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 CHART PATTERNS (Quick View-1) RISK 1
Reward-2

Name Type Appear Name Type Appear

Head & Bearish Inverted Bullish
Head & Shoulder
Shoulder

Double / Bearish Double Bullish

[Link]

Triple TOPs Triple BOTTOMs +

Reversal
PATTERNS

FLAGS Bullish Inverted mostly

(Bull Flag) + Bearish
Conti.
FLAGS +
(Bear Flag)
Cont.

Rounding Bearish Rounding Bullish

BOTTOMs l
TOPs

venKEY [Link] venKEY

 CHART PATTERNS (Quick View-2) RISK 1
Reward-2

Name Type Appear Name Type Appear

Ascending Mostly Ascending Break
Triangle Bullish Channel Out
Criteria

Descending Mostly Descending Break

[Link]

Triangle Bearish Channel Down

Criteria
PATTERNS

Symmetrical Either Horizontal Break

Triangle Side Channel Out /
Break Break
Down
Criteria

Diamond Either Cup & Bullish

Top of Chart Side Handle Above
Bearish Break neckline

venKEY [Link]
venKEY
 Chart PATTERNS Chartists try to identify patterns to
anticipate the future price direction.

Trading PATTERNS
In technical analysis, the distinctive formation Head & Shoulder (2)
created by the movement of security prices
on a chart. Triangles (4 types)

Channels (3 types)
[Link]

Price-lines in course of its journey Reversal

time creates PICTORIAL DIAGRAMS Patters Diamond
is known as “PATTERNS”
PATTERNS

Cup & Handle

It is identified by a line connecting common
price points (closing prices, highs, lows) over Rounding Top/Bottom
a period of time.
Continuation
Patterns Patterns in security prices occur daily.
price patterns may be easy to
understand & see on paper
TOPS/Bottoms But
Flags (2) types
Double/Triple much harder to spot, and trade
these formations in real time.
Pennants Wedges But If you Spot
YOU GAIN MORE & more…
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 Patterns Head & Shoulders
[Link]

Bearish Reversal
Left Shoulder: Bulls push prices upwards making new highs; however these new - Creates on top of the chart
highs are short lived and prices retreat.
PATTERNS

- Some times-Irregular
Head: Prices don't retreat for long because bulls make another run, this time appearance
succeeding and surpassing the previous high; a bullish sign. Prices retreat again, only
to find support yet again.
NECK-LINE - A level of support or
resistance found on a head and shoulders
Right Shoulder: The bulls push higher again, but this time fail to make a higher
pattern that is used by traders to
high. This is very bearish, because bears did not allow the bulls to make a new
determine strategic areas to place orders.
higher or even an equal high. The bears push prices back to support (Confirmation
line); this is a pivotal moment - Will bulls make another push higher or have the
Each peak of a regular head and shoulders
bears succeeded in stopping the move higher.
pattern falls toward a support level, also
known as a neckline, before it rises to
Head and Shoulders - Sell Signal create the next peak.
If prices break the confirmation support line, it is clear that the bears are in charge;
thus, when price closes below the confirmation line, a strong sell signal is A move below the neckline (in the
given. case of a head and shoulders top) is
Note that a downward sloping confirmation line is generally seen as a more used by traders as a signal of a
powerful Head & Shoulders pattern, mainly because a downward sloping reversal of the current uptrend.
venKEY confirmation line means that prices are making lower lows.
6
 Patterns Inverted Head & Shoulders
Must confirm with VOLUMES
The reasoning behind a Head & Shoulders pattern is as follows:

Left Shoulder: Bears push prices downwards making new lows;

Bullish Reversal
however, bulls begin to return and push prices slightly higher.

Head: Price gains don't last long before bears return and push prices
even lower than before; a bearish sign. Prices then find buyers at the
new lower prices.
[Link]

Right Shoulder: The bears push downward again, but this time fail
to make a lower low. This is generally seen as bullish sign, bears were
unable to push prices further down. Decision time occurs when the
price is pushed higher back to support (Confirmation line); either
bears will push prices back down or bulls will push prices higher,
PATTERNS

regaining control of the stock, future, or currency pair. This pattern is also known as a
"reverse head and shoulders"
Reverse Head and Shoulders Buy Signal Stop Loss = WEEKLY LOW
When price closes above the confirmation line, a strong buy
signal is given.
Usually an upward sloping confirmation line is seen as a more
powerful Reverse Head & Shoulders pattern, mainly because an Reverse Head and Shoulders
upward sloping confirmation line means that prices are making higher The opposite of the Head & Shoulders
pattern is the Reverse Head & Shoulders
highs. pattern which is another strong pattern, this
time a bottoming pattern

Volume analysis is important when using the Head & Shoulders

chart pattern. How to incorporate volume into the study of the Head
& Shoulders pattern is discussed next.
Volume and Head and Shoulders
When the confirmation line of a Head & Shoulders pattern breaks to
the downside, a large amount of volume should occur as well.
The chart below of General Electric (GE) shows a sharp increase in
volume when the confirmation line of the Head & Shoulders pattern
was broken:
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 Patterns TRIANGLES
1. Ascending Triangle - When the upper
trendline is horizontal and the lower trendline
is rising with higher lows.
[Link]

2. Descending Triangle - When the lower

PATTERNS

trendline is horizontal and the upper trendline is

descending with lower highs. 4. Inverted Triangle - When the upper and
lower trendlines converge at roughly the same angle
without touching each other.

A triangle needs a minimum of four points (price ‘tests’) to

be valid – two upper tests and two lower tests, which is the
same definition for establishing a valid trendline. The
3. Symmetrical Triangle - When the upper and significance of a triangle is similar to that of trendline
lower trendlines converge at roughly the same angle. significance and validity.

Classic Technical Analysis teaches that Symmetrical

Triangles are more frequently Continuation
Patterns than Reversal Patterns, and that Ascending
Triangles are “Bullish” while Descending Triangles
are “Bearish.”
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 Patterns ASCENDING Triangle
Bullish Reversal & Continuation Pattern

Assumptions of ASCENDING Triangle :

Target
If Ascending Triangle is made up of 2 trend lines
where (1) upper one is flat and (2) lower one is
diagonal.
- Entry
[Link]

2/3 distance
The line reflects the psychology that sellers are
interested to sell at a particular price… WHERE as
-- Stop Loss
Measure
PATTERNS

rising trend line tells us the BUYERS are interested

to buy at the higher price.
It is basically a war between
WEAK SELLERS vs. STRONG BUYER

How to trade with Triangle :

Measuring Indications :
Measure the height (base) of the said
The Tri-angle has to be divided into 3
pattern. And project the same distance
parts such as a,b,c.
from the point of BREAK-OUT
If it take a fresh break-out at 2/3rd part
or from “b” it creates NEW TREND
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 Patterns DESCENDING Triangle
Bearish Reversal & Continuation Pattern

Measure Assumptions of DECENDING Triangle :

If Ascending Triangle is made up of 2 trend lines
where (1) Lower one is flat and (2) Upper one is
-- Stop Loss diagonal.
[Link]

The line reflects the psychology that SELLERS are

2/3 distance
interested to SELL at a particular price… WHERE
- Entry
PATTERNS

as diagonal down trend line tells us the Sellers are

interested to SELL at the LOWER price.
Target

It is basically a war between

WEAK BUYERS vs. STRONG SELLER

How to trade with Triangle :

Measuring Indications : The Tri-angle has to be divided into 3

Measure the height (base) of the said parts such as a,b,c.
pattern. And project the same distance
from the point of BREAK-DOWN If it take a fresh break-out at 2/3rd part
or from “b” it creates NEW TREND
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 Patterns SYMMETRICAL Triangle
• Characterized as IN-DECISION
• Market in PAUSE
• The future of the market is
QUESTIONED
[Link]

Target
PATTERNS

Measure

-- Stop Loss

Assumptions of Symmetrical Triangle :

Measuring Indications :
Measure the height of the said pattern. If Ascending Triangle is made up of 2 trend lines
And project the same distance from the where (1) Lower one Diagonal and (2) Upper one
point of Break-out / Break-Down is diagonal.
Advice : Confirmation with other
Indicators (RSI, MACD, Stochastic), It is basically a war between
Note : VOLUME should support trend WEAK BUYERS vs. WEAK SELLER
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 Patterns CHANNELS

Ascending Channel Descending Channel Horizontal Channel

Up Channel Down Channel Sideways channel

Higher Highs & Lows Lower Highs & Lows Ranging Highs & Lows

To create a Sideways
[Link]

To create an up (ascending) To create a down (descending)

channel, simply draw a parallel channel, simple draw a parallel (Horizontal) channel, simple
line at the same angle as an line at the same angle as the draw a Horizontal lines at the
uptrend line and then move that downtrend line and then move frequent created Highs & Lows..
line to position where it touches that line to a position where it Which shall almost near / around
PATTERNS

the most recent peak. touches the most recent valley. price range trading.

May appear @ Bottom/Top of

the CHART

Important things to remember about trend lines:

When constructing a channel, both trend lines must be parallel to each other.
Generally, the bottom of channel is considered a buy zone while the top of channel is considered a sell zone.
Like in drawing trend lines, DO NOT EVER force the price to the channels that you draw! A channel
boundary that is sloping at one angle while the corresponding channel boundary is sloping at another is not
correct and could lead to bad trades.
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 Patterns ASCENDING Channel
Ascending Channel :

An ascending channel is the price action

contained between upward sloping parallel
lines. When prices hit the bottom
trend line, this may be used as a
Higher pivot highs and higher pivot lows buying area. When prices hit the
are technical signals of an uptrend. upper trend line, this may be
used as a selling area.

Trendlines frame out the price channel by

[Link]

drawing the lower line on pivot lows, and the

upper line is the channel line drawn on pivot
highs. Pretty easy to see now with this stock chart how a ascending
channel actually looks.
Price is not always perfectly contained but the
PATTERNS

Now, my lines aren't perfectly parallel, but I think you get the
channel lines show areas of support and
idea.
resistance for price targets. A higher high above
an ascending channel can signal continuation. Investing in stocks using this technique is fairly simple when
playing a long term channel like the one above.
A lower low below the low of an
ascending channel can signal trend If the stock breaks the channel's top, then that is a bullish sign
change. as higher prices or possibly even a steeper ascending channel is
to follow.

On the flip side, if the channel is broken to the downside, it is

a bearish sign of possibly lower prices to come.

How to trade :

If price breaks above the ascending price channel, it may be the

start of aParabolic move. Usually when price breaks above the
ascending channel, it is a sign that the whole world is
interested in the stock.

Price may move rapidly upwards. These kind of moves does

not last for long. If you own the stock, you may want to
consider selling some of your positions as the stock climbs
venKEY higher.
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 Patterns DESCENDING Channel
Descending Channel :

A descending channel is the price action

contained between downward sloping parallel
lines.

Lower pivot lows and higher pivot lows

are technical signals of an uptrend.

Trendlines frame out the price channel by

[Link]

drawing the lower line on pivot lows, and the

upper line is the channel line drawn on pivot
Pretty easy to see now with this stock chart how a
highs. descending channel actually looks.

Price is not always perfectly contained but the Now, my lines aren't perfectly parallel, but I think you get
PATTERNS

channel lines show areas of support and the idea.

resistance for price targets. A higher high above
an descending channel can signal continuation. Investing in stocks using this technique is fairly simple when
playing a long term channel like the one above.
A Higher high above the high of a
If the stock breaks the channel's lower, then that is a
descending channel can signal trend
bearish sign as lower prices or possibly even a steeper
change. descending channel is to follow.

On the flip side, if the channel is broken to the upside, it is

a bullish sign of possibly higher prices to come.

How to trade :

If price breaks above the decending price channel, it may be

the start of aParabolic move. Usually when price breaks above
the decending channel, it is a sign that the whole world is
interested in the stock.

Price may move rapidly upwards. These kind of moves does

not last for long. If you own the stock, you may want to
consider selling some of your positions as the stock climbs
venKEY higher.
14
 Patterns Horizontal Channel
The Horizontal Channel
Horizontal Channel The horizontal channel is either a reversal or
continuation pattern, but it's impossible to tell
Price is framed out in a trading which until the pattern is completed with a
range by the pivot highs (resistance) breakout, either down or up. The pattern is
and pivot lows (support).Trendlines similar to the head and shoulders pattern. Notice
drawn on pivots give a visual picture that the volume decreases gradually over the span
of price action. A new high in price of the pattern, a characteristic common to
above the horizontal channel is a triangles and head and shoulders patterns as well
as to horizontal channels. Indecisive trading gets
technical buy signal. A new low in
[Link]

exhausted.
price below the horizontal channel As in triangles, the breakout can occur to the
(or rectangle pattern) is a technical upside or to the downside. But the upside
sell signal. breakout has to be accompanied by a solid
increase in volume. If the volume isn't impressive,
PATTERNS

relative to the previous days or weeks of trading,

the breakout is suspect.
For a downside breakout, the volume doesn't
have to be heavy. There will likely be an initial
surge in volume as traders sell their shares,
anticipating a decline, but prices generally tend to
fall of their own weight. In other words, there will
likely be sellers, but not likely many buyers.

Support

Break-out / Resistance
Break down
Patterns
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 Patterns DIAMOND Pattern
Diamond Chart Pattern :
A diamond chart formation is a rare chart
pattern that looks similar to a head and
shoulders pattern with a V-shaped
neckline. Diamond chart reversals rarely
happen at market bottoms, it most often
occurs at major tops and with high-
[Link]

volume. Since diamonds are a variation of

head and shoulders tops, you have to
resist the desire to classify every head and
shoulders top as a diamond formation. The
PATTERNS

reason you will want to avoid this is

because the diamond will signal a break in
trend much earlier than a head and
shoulders pattern, which could result in a
premature short position. To calculate the
breakout potential for a diamond
formation, you will want to take the
distance between the highest and lowest
AXIS BANK (1,324.40, 1,341.00, 1,313.15, 1,328.30, +18.5000) 1660
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point in the diamond formation and add it

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Dimond Pattern 1590
created in AXIS Bank recently
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to the breakout point. However, in most

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occurrences a breakout from the diamond

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chart formation will carry stocks much

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further.
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August Septem ber October Novem ber Decem ber 2011
 Tops/Bottoms Double/Triple Bottom
Double Bottom
Common & highly effective
price reversal pattern.
[Link]
PATTERNS

To create a double bottom pattern, price begins in a downtrend, stops, and

then reverses trend. However, the reversal to the upside is short-term.
Price breaks again to the downside only to stop again and reverse direction
upwards. With the second bottom of the double bottom pattern, it is
The Double Bottom reversal pattern is a heavily usually more bullish if the second low is higher than the first low.
used and effective charting reversal pattern.
…………………………………… Double Bottom Buy Signal
The signal to buy is given when the confirmation line is penetrated to
Another similar and popular bottom reversal
the upside. The confirmation line is drawn across the top of the double
pattern is the Reverse Head & Shoulders
bottom pattern (see chart above).
Pattern (see: Head & Shoulders). Often, after price penetrates the confirmation line, price will retrace for a
………………………………… short time, sometimes back to the confirmation line. This retracement
The opposite of the Double Bottom is the offers a second chance to get into the market long.
bearish Double Top pattern Volume also plays an important part of interpreting the Double Bottom
(see: Double Top). pattern; this is illustrated in the chart above
Generally, volume should explode when the confirmation line is
venKEY penetrated as it did in the above chart.
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 Tops/Bottoms Double/Triple TOP
Double Bottom
Common & highly effective
price reversal pattern.

Double Top Sell Signal

Sell when price closes below the
[Link]

confirmation line.
Note that traders expect a
significant increase in volume to
accompany the confirmation line break; if
PATTERNS

there is very little volume when price

pierces the confirmation line, then the
move downward is suspect. Small volume
Double Top Formation Components
usually means weak support of price
First High: Bulls push prices upwards making new highs;
movement
however, these new highs are short lived and prices
retreat.
The Double TOP reversal pattern is a heavily
used and effective charting reversal pattern. Second High: Prices don't retreat for long because bulls
……………………………………………… make another run, making a similar high. Nevertheless, this
Another similar chart pattern is the Head & is bearish, because bulls were unable to push prices higher;
Shoulders Pattern (see: Head & Shoulders).
bears held their ground at the previous high level. The
………………………………………………
The opposite of the Double Top is the bears push prices back to support (Confirmation line); this
bullish Double Bottom (see: Double is a pivotal moment - either bulls will make another push
Bottom). higher or bears will take control and push prices even
lower, more than likely taking over for good.
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 PATTERNS

venKEY
[Link]
Patterns
CUP & HANDLE Pattern

19
 Patterns INVERTED Triangle

RELIANCE INDS (970.200, 994.800, 960.000, 982.200, +15.9500) 1600

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May June July August September November December2008 February March April May June July August September November 2009 February
PATTERNS

Assumptions of ASCENDING Triangle :

It has no much Technical Importance… how ever we can trade it with
confirmation of other Indicators

[Link]
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 Flags
Bullish Flag Bearish Flag

Flag and pennants are one of the most trusted

continuation patterns)
[Link]

Flags and pennants can be categorized as

continuation patterns. They usually represent only
brief pauses in a dynamic market. They are
typically seen right after a big, quick move. The
PATTERNS

market then usually takes off again in the same

direction. Research has shown that these patterns
are some of the most reliable continuation
patterns.

Flags are divided into 2 categories :

Bullish flags - Bullish flags are characterized by lower
tops and lower bottoms, with the pattern slanting
against the trend. But unlike wedges, their
trendlines run parallel.
Bearish flags- Bullish flags are characterized by
lower tops and lower bottoms, with the pattern
slanting against the trend. But unlike wedges, their
trendlines run parallel.

Pennants look very much like symmetrical

triangles. But pennants are typically smaller in
size (volatility) and duration.
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 Wedges Pennants
[Link]

Wedge Pennant is short-term continuation stock

A wedge pattern is similar to chart pattern(compare with Flag) , lasting for
symmetric triangle - it can be a one to three weeks normally.
PATTERNS

continuation or reversal pattern, with

two differences. It arise after a sharp stock price movement,
when the bulls or bears take a break before
While the triangle shows sideways they continue to push further in the same
movement, the wedge can move direction.
either upward (normally bearish sign)
or downward (normally bullish sigh). Pennant with converging trend lines looks
The other difference is that wedge much like symmetric triangle, the flag
normally takes much longer to pattern with two parallel trend lines looks
complete then triangle, usually much more like a channel. The pattern is
between three and six months. considered to complete, when the trend line
in the direction of the basis trend is broken.
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