The following thread will be on various technical patterns to look for when charting that can indicate a potential reversal OR continuation.⬇️
The 1st set of patterns I will go over are Flag formations. These formations can indicate reversals or continuation in either direction. These formations are areas of consolidation in and up or downtrend.
Bull Flags: A bull flag is a continuation pattern when something is in an overall uptrend. This is applicable to all time frames. When looking to enter a bull flag, you can either bid within the formation, or play the breakout.
Bear Flags: A bear flag is the inverse of a bull flag, and signals a bearish trend within the chart. You will see bear flags form in a stock that is in an overall downtrend.
The 2nd set of formations I would like to go over are Pennants. Pennants are similar to flags, except the areas of consolidation within them are tighter almost forming a point.
Bull Pennant: A bull pennant is an area of consolidation within a stock that is in an overall uptrend. Below is an example of what this looks like. You can see the difference between a flag and pennant.
Bear Pennant: A bearish pennant is an area of consolidation within a stock that is in an overall downtrend. Below is a picture of what that looks like, and how it differs from a bull flag.
The 3rd set of patterns I would like to talk about are neutral patterns. These are formations within a chart that are neither bullish or bearish, but can break in either direction.
Descending / Ascending Triangles: A descending or ascending triangle is a formation that occurs in a stock that is in either trend. These formations have the chance to break in either direction
The 4th set of patterns I would like to talk about are double top and double bottom patterns. These patterns can indicate potential reversals in either direction.
Double Top: Double Tops are areas on a chart that experience rejection multiple times. These patterns can be good short / put opportunites.
Double Bottom: Double Bottoms are the inverse of double tops and indicate levels of support within a chart:
The 5th set of formations I would like to talk about are Head & Shoulder & Inverse Head & Shoulder patterns. Again, these are formation that can indicate reversal in either direction.
Head & Shoulders: The Head & Shoulders Pattern is a very useful pattern to be able to identify as it can give you great insight in the potential direction of the stock. These are very bearish in nature.
Inverse Head & Shoulders: An Inverse Head & Shoulders pattern is exactly what it states, the inverse of a head & shoulders and typically very bullish in nature.
The 6th and final set of formations I would like to talk about are Cup & Handle, and Inverted Cup & Handle formations. These formations can indicate potential bullish or bearish trends within a stock.
Cup & Handle: A Cup & Handle is a formation that typically takes an extended period of time to mature. These are great especially on the daily timeframe and can signal a potential breakout.
Inverted Cup & Handle: An Inverted Cup & Handle is a bearish formation that can signal a potential downside break.
As always, I hope this thread will be of use to some of you! As you gain more screen time, these patterns will be very easy to pick up on!
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