What is a Head and Shoulders pattern?

A Head and Shoulders is a bearish reversal pattern with three peaks where the middle peak (head) is highest and the two outer peaks (shoulders) are lower and roughly equal. It signals trend reversal when price breaks below the neckline.

What is the difference between a Flag and a Pennant?

Both are continuation patterns following sharp price moves. A Flag has parallel consolidation lines (rectangular), while a Pennant has converging lines forming a small symmetrical triangle. Both typically break in the direction of the prior trend.

Chart Patterns Reference

A comprehensive guide to technical chart formations recognized by professional traders worldwide. Master the art of identifying, measuring, and trading these essential market patterns with precision.

Reversal Patterns

Head and Shoulders

Bearish Reversal

A baseline (neckline) with three peaks. The middle peak (head) is the highest, while the outside two (shoulders) are lower and roughly equal height.

Interpretation & Guidance

Signal: Sell when price breaks below the neckline.
Target: Measure the distance from the Head to the Neckline, and project that distance downwards from the breakout point.

Inv. Head and Shoulders

Bullish Reversal

The opposite of the standard version. It forms after a downtrend with a low trough (head) between two higher troughs (shoulders).

Interpretation & Guidance

Signal: Buy when price breaks above the neckline resistance.
Target: Measure depth from Head to Neckline and project upwards from breakout.

Double Top

Bearish Reversal

An "M" shaped pattern occurring at the top of an uptrend. Price hits a resistance level twice but fails to break higher.

Interpretation & Guidance

Signal: Sell when price breaks below the support valley between the two peaks.
Psychology: Buyers attempted twice to push higher and failed; momentum is shifting to sellers.

Double Bottom

Bullish Reversal

A "W" shaped pattern occurring after a downtrend. Price tests a support level twice and holds, indicating a floor.

Interpretation & Guidance

Signal: Buy when price breaks above the resistance peak between the two lows.
Psychology: Sellers failed to push price to a new low; buyers are taking control.

Triple Top

Bearish Reversal

Three distinct peaks at approximately the same price level. It signifies a very strong resistance that buyers cannot overcome.

Interpretation & Guidance

Signal: Strong sell signal on the breakdown of the support line.
Note: Takes longer to form than a Double Top but is considered more reliable due to the third failure.

Continuation Patterns

Bullish Flag

Bullish Continuation

A sharp rise (the pole) followed by a rectangular consolidation sloping gently downwards against the trend.

Interpretation & Guidance

Signal: Buy on the breakout of the upper channel line.
Target: Add the height of the flagpole to the breakout point.

Bearish Flag

Bearish Continuation

A sharp drop (pole) followed by a short consolidation channel sloping upwards against the trend.

Interpretation & Guidance

Signal: Sell on the breakdown of the lower channel line.
Target: Subtract the height of the flagpole from the breakdown point.

Bullish Pennant

Bullish Continuation

Similar to a flag (sharp pole), but the consolidation is a small symmetrical triangle instead of a channel.

Interpretation & Guidance

Signal: Buy on the breakout of the upper trendline.
Timing: Pennants are usually brief pauses (1-3 weeks). A breakout happens quickly.

Rectangle

Bilateral

Price moves sideways between parallel support and resistance lines. It represents a period of accumulation or distribution.

Interpretation & Guidance

Direction: Trade in the direction of the breakout. If it breaks top, it's bullish; breaks bottom, it's bearish.
Target: The height of the rectangle projected from the breakout.

Triangles & Wedges

Ascending Triangle

Bullish Continuation

A flat resistance line and a rising support line. Buyers are getting more aggressive (higher lows) while sellers hold a static level.

Interpretation & Guidance

Bias: Strongly bullish. The pressure usually pops the lid (resistance).
Signal: Entry on a confirmed close above the horizontal resistance line.

Descending Triangle

Bearish Continuation

A flat support line and a falling resistance line. Sellers are getting more aggressive (lower highs) while buyers hold a static floor.

Interpretation & Guidance

Bias: Strongly bearish. The floor usually gives way.
Signal: Entry on a confirmed close below the horizontal support line.

Symmetrical Triangle

Bilateral

Two converging trendlines. Lower highs and higher lows. Represents a volatility squeeze where neither side is winning.

Interpretation & Guidance

Signal: Can break either way. Usually continues the prior trend, but wait for the breakout.
Warning: Watch for false breakouts (fakeouts) near the apex.

Rising Wedge

Bearish Reversal

Price makes higher highs and higher lows, but the range is narrowing (lines converge upward). Buying momentum is fading.

Interpretation & Guidance

Bias: Bearish. Even though price is rising, the "squeeze" usually resolves to the downside.
Context: Most powerful when found at the top of an uptrend.

Falling Wedge

Bullish Reversal

Price makes lower highs and lower lows, but the range is narrowing (lines converge downward). Selling pressure is exhausting.

Interpretation & Guidance

Bias: Bullish. The squeeze usually resolves to the upside.
Context: Often marks the end of a correction within a larger uptrend.

Cup and Handle

Bullish Continuation

A rounded bottom (the cup) followed by a short pullback (the handle). Looks like a tea cup.

Interpretation & Guidance

Signal: Buy when price breaks above the rim of the cup (resistance).
Target: Measure the depth of the cup and project it upwards. The handle should not retrace more than 50% of the cup depth.

Inv. Cup and Handle

Bearish Continuation

An upside-down U-shape followed by a short upward drift (handle). Occurs in downtrends.

Interpretation & Guidance

Signal: Sell when price breaks below the rim support.
Target: Measure the height of the cup and project it downwards.