Common Chart Patterns

Why patterns form

Chart patterns are recurring shapes created by the tug-of-war between buyers and sellers. They describe consolidation and transition phases — they are a language for structure, not magic shapes with guaranteed outcomes.

Continuation patterns

• Flags and pennants: a sharp move followed by a small, tilted consolidation. A break in the direction of the original move suggests continuation.
• Triangles: converging highs and lows showing compression. Ascending triangles (flat top, rising lows) lean bullish; descending lean bearish; symmetrical are neutral until broken.

Reversal patterns

• Double top / double bottom: two failed attempts at the same extreme. Confirmation is the break of the middle swing (the neckline), not the second touch itself.
• Head and shoulders: a higher high (head) between two lower highs (shoulders); breaking the neckline completes it. The inverse version marks potential bottoms.