Chart Patterns

SIMPLEWAY
ACADEMY
Chart patterns are categorized into two primary types
based on the trend direction.

Bullish chart patterns

Bearish chart patterns

These two patterns are classified into many chart patterns based on
the shape and structure of the market.

Reversal chart patterns

First of all, we will look closer at reversal chart patterns that help
identify a change in the trend direction. The patterns to be considered
are Double Top, Head and Shoulders, Inverse Head and Shoulders,
Double Bottom, Rising Wedge, and Falling Wedge.

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What Are Chart Patterns?

A chart pattern is a visual way of displaying movement patterns in a

price chart. Traders use them to understand what direction a price is
likely to go in based on past performance. They are useful as they help
us to determine potential entry and exit points on a security. As the
balance of power shifts in a market, a chart pattern begins to emerge.

An upward trend indicates that the Bulls (buyers) are in control.

A downtrend indicates that the Bears (sellers) are in control.

Chart patterns can be as short as one day or spread out over many
years. Technical analysis of charts can be used to make both short and
long-term trading decisions as data can be either intraday ( Day
Trading, Scalping ), daily, weekly or monthly.

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Double Top

Support Entry

Target

A double top is a very common pattern and indicates a reversal in

price direction.

In an uptrend, the price finds its first resistance (1) which will form the
basis for a horizontal line that will be the resistance level for the rest of
the pattern.

As the price reverses, it finds its first support (3) which will also form
the basis for a horizontal line that will be the support level for the rest
of the pattern.

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As the price reverses and moves upward, it finds the second
resistance (3), which is at the same similar resistance as the first
resistance (1).

The pattern completes when the price reverses direction, moving

downward until it breaks the support level set out in the pattern (4).

Example

1st
2nd

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 Double Bottom
Target

Entry
Support

A double top is a very common pattern and indicates a reversal in

price direction. It is also the inverse of the double top.

In a downtrend, the price finds its first resistance (1) which will form
the basis for a horizontal line that will be the support level for the rest
of the pattern.

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As the price reverses, it finds its first resistance (2) which will also form
the basis for a horizontal line that will be the resistance level for the
rest of the pattern.

As the price reverses and moves downward, it finds the second

support (3), which is at the same similar support level as the first
support (1).

The pattern completes when the price reverses direction, moving

upward until it breaks the resistance level set out in the pattern (4).

Example

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Head and Shoulders

Neckline
Entry

Target

In an uptrend, the price finds its first resistance (1) which forms the
left shoulder of the pattern.

As the price reverses, in a short increment, it finds its first support

level (2), completing the formation of the left shoulder.

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should be accompanied by an increase in trading volume.

The price reverses and moves upward, it finds the second resistance
(3), forming the head, which must be higher than the first resistance (1).

The price reverses and moves downward until it finds the second
support (4), near to the same price of the first support (2) completing
the head formation.

The price reverses and moves upward until it finds the second
resistance (5), which is near to the same price as the first resistance (1).
This forms the right shoulder of the pattern.

The pattern completes when the price reverses direction, moving

downward until it breaks out of the lower part of the right shoulder
pattern (6). Head

Example

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Inverse Head and Shoulders

Target

Neckline
Entry

The head and shoulders Inverted, as the name suggests is an

inverted version of the head and shoulders pattern. It indicates a
reversal of direction (bullish) and is not a very common pattern.

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In a downtrend, the price finds its first support (1) which forms the
left shoulder of the pattern.

As the price reverses, in a short increment, it finds its first resistance

level (2), completing the formation of the (inverted) left shoulder.

The price reverses and moves downward, it finds the second support
(3), forming the (inverted) head, which must be lower than the first
support (1).

In a downtrend, the price finds its first support (1) which forms the
left shoulder of the pattern.

As the price reverses, in a short increment, it finds its first resistance

level (2), completing the formation of the (inverted) left shoulder.

The price reverses and moves downward, it finds the second support
(3), forming the (inverted) head, which must be lower than the first
support (1).

Example

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Rising Wedge

Entry

Target
The rising wedge is a bearish indicator and can be found in either an
uptrend or downtrend. It is not a common pattern.

In either an uptrend or downtrend, the first point in this pattern (1)

forms the first support level and also the lowest point in the pattern.
As the price reverses, the first resistance level (2) is set and is also the
lowest resistance level in the pattern.

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As the price reverses, the second support (3) is found and the first (1)
and the second support (3) form the bottom angle of the rising
wedge.

The price reverses and the second resistance level (4) is at a point
higher than the first resistance level (2).

The pattern completes when the price reverses (4) and breaks
through the bottom of the rising wedge (5).

Example

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 Falling Wedge

Target

Entry

The falling wedge is a bullish pattern that can be found in either an

uptrend or downtrend. The falling wedge is not a very common
pattern. The falling wedge is also the inverse of the rising wedge.

This chart pattern can be formed after either an uptrend or a

downtrend where the first resistance (1) marks the highest point in this
pattern. The price reverses, finding the first support (2) which is also
the highest support level in this pattern.

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The price reverses, moving upward until hitting the second resistance
level (3) which is lower than the first resistance point (1). These two
points also mark the top angle of the falling wedge.

The price reverses finding the second support (4) which is also lower
than the first support level (2), marking the bottom angle of the falling
wedge.

The pattern completes when the third resistance level (5) breaks
through the upper angle of the falling wedge.

Example

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 Expanding triangle pattern (Bearish)

Entry

Target

A bearish expanding triangle is a bearish pattern. It is also known as the

expansionary formation. Traders use this pattern to identify the
reversal of the upward trend or continuation of the bull market. It is
not easy to identify, and the chance of its occurrence is very low. It
forms in very high volatile market.

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The pattern can be present at all time frames, but it is effective if
formed in the upward trend with every bounce back the pattern
expands further. In bearish expanding triangle you will notice that the
highs and lows are getting bigger from the apex point to the open
mouth. This clearly indicates that there are equal buyers and sellers in
the market, which makes the market volatile.

Expanding triangle pattern (Bullish)

Target

Entry

Support level and resistance level which are drawn will have the
apex point on left and the open mouth on the right
With every swing the Highs and lows are getting bigger, which
means the market is volatile

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 Triple Top (Bearish)

Triple top is a bearish pattern A triple top or triple peak is a bearish

chart pattern. It is very dependable in stock chart patterns used in
technical analysis. It is straightforward and it is defined by three clear
peaks that form about the same level in the market.

A triple top is a bearish indicator and a less common pattern. It

indicates a reversal in price direction.

As the price reverses, it finds its first support (2) which will also form
the basis for a horizontal line that will be the support level for the rest
of the pattern.

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As the price reverses and moves upward, it finds the second resistance
(3), which is at the same similar resistance level as the first resistance
(1).

As the price reverses and moves downward, it finds the second

support (4), which can be higher or lower than the first support (2).

The price movement reverses and moves upward until it hits the
resistance level (5) which is at the same similar resistance level as the
first resistance (1).

The pattern completes when the price reverses direction, moving

downward until it breaks the support level set out in the pattern (6).

Example

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Triple Bottom (Bullish)

The triple bottom pattern is a bullish reversal pattern. It’s created

when price bounces off support 3 time at similar levels. It’s a sign the
buyers are coming in the market to avoid the security price to drop
lower.

In a downtrend, the price finds its first support (1) which will form the
basis for a horizontal line that will be the support level for the rest of
the pattern.

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As the price reverses, it finds its first resistance (2) which will also form
the basis for a horizontal line that will be the resistance level for the
rest of the pattern.

As the price reverses and moves downward, it finds the second

support (3), which is at the same similar support level as the first
support (1).

As the price reverses and moves downward, it finds the second

resistance (4), which can be higher or lower than the first resistance (2).

The price movement reverses and moves upward until it hits the
support level (5) which is at the same similar support level as the first
support (1).

The pattern completes when the price reverses direction, moving

upward until it breaks the resistance level set out in the pattern (6).

Example

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 Continuation Chart Patterns

Continuation patterns in technical analysis are, as the name suggests,

chart patterns that show that an asset’s price trend will continue once
the pattern has finished. Thus, continuation patterns are understood
as a pause in an asset’s trend; a period of consolidation, or price
acceptance, before the trend continues its journey. They can be both
bearish and bullish, with the former showing a continuation of a
downtrend and the latter showing a continuation of an uptrend.

In addition, some continuation patterns, such as wedges, can show

reversals of a trend, while others, such as triangles, are bilateral chart
patterns that show that an asset’s price can break out in either
direction.

Continuation patterns can be used over different time periods too and
are therefore helpful for day traders or long-term traders, which are
more common in the crypto space. However, continuation patterns are
not fool proof, and should therefore be used in conjunction with other
indicators. Continuation patterns are a great indicator to help a trader
make their trading decision, but they should not be used alone.
Traders will back up their findings with other trading tools and
indicators, sometimes even waiting for the breakout to happen to first
confirm the breakout direction before entering a trade.

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 Bullish Flag

Target

Entry

A bullish flag is a continuation pattern. The flag is formed by two

parallel bullish lines that form a rectangle. It is therefore oriented in
the opposite direction to the trend that it consolidates. Unlike a bullish
channel, this pattern is very short term and indicates the need for
sellers to take a break.

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 Example

It can be complex identifying a bull flag on a chart because the pattern

entails several different components. Traders will need to correctly
identify and understand these components to trade this pattern
successfully. Key things to look out for when trading the bull flag
pattern are:

Preceding uptrend (flag pole)

Identify downward sloping consolidation (bull flag)

If the retracement becomes deeper than 50%, it may not be a flag

pattern. Ideally, the retracement ends at less than 38% of the
original trend

Enter at bottom of the flag or on the breakout above the high of the
upper channel boundary

Look for price to break higher with a length potentially equal to the
size of the flag pole

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 Bearish Flag

Entry

Target

A bear flag is a technical pattern that provides an extension /

continuation to an existing downward trend. The bear flag formation is
underlined from an initial strong directional move down, followed by a
consolidation channel in an upwards direction (see image below). The
strong move down is known as the ‘flagpole’ whilst the consolidation is
referred to as the ‘flag’ itself.

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 Example

The chart above displays a bearish flag pattern being created on the
USD/CADdaily chart. The flag pole has been established by connecting
the January 3rd high at 1.36500 with the January 9th low at 1.31800.
Totalling the difference between these points culminates in an initial
decline of 470 pips. The consolidation phase of the move is highlighted
by the blue channel.

As price gradually rises, the flag pattern slowly takes shape. It’s
important to note that there is no established bearish flag pattern until
price breaks out to lower lows of the channel. At that point, traders use
the 470 pip (flag pole) initial decline to establish potential price targets
near 1.30000.

In this example, price does not quite reach this level but this is purely a
guideline. Trader’s need to be aware of price movements and other
fundamental and technical moves that may occur throughout the
trade journey.

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 Bullish Pennant

A bullish pennant, as the name suggests is a bearish indicator and a

very common pattern.

In a sharp and prolonged uptrend, the price finds its first resistance
(2) which will form the pole of the pennant.

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As the price reverses, in a short increment, it finds its first support
level (3).

In short increments of price reversal, the pennant-like formation of the

pattern will appear. This is identified by lower highs and higher lows in
a narrow pennant-like formation.

The pattern completes when the price reverses direction, moving

upward until it breaks out of the upper part of the pennant-like
formation (4).

Example

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 Bearish Pennant

A bearish pennant, as the name suggests is a bearish indicator and a

very common pattern. It is also the inverse of the bullish pennant.

In a sharp and prolonged downtrend, the price finds its first support (2)
which will form the pole of the pennant.

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As the price reverses, in a short increment, it finds its first resistance
level (3).

In short increments of price reversal, the pennant-like formation of

the pattern will appear. This is identified by lower highs and higher
lows in a narrow pennant-like formation.

The pattern completes when the price reverses direction, moving

downward until it breaks out of the lower part of the pennant-like
formation (4).

Example

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Ascending Triangle

This is a bullish indicator and indicates the continuation of an upward

trend. The ascending triangle is a very common pattern seen in bullish
markets.

n an uptrend, first resistance is found (1) and the price reverses until it
finds its first support (2). Price reverses direction and continues its
upward movement until the second resistance is found (3) which is
near or level to the first resistance level and also forms the horizontal
line in this pattern.

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IThe price reverses direction and finds its support slightly higher
than before (4).

The pattern completes when the price breaks through the initial
resistance level as set out in this pattern (5).

Example

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Descending Triangle

This is a bearish indicator and indicates the continuation of the

downward trend. It is also the inverse of an ascending triangle.

In a downtrend, the first resistance is encountered (1) setting the

horizontal resistance for the rest of the pattern. The price reverses
direction and finds its first support (2) which will be the highest point
in this pattern.

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The price reverses and finds its second support (3) at a similar level to
the first resistance (1). The price again reverses and finds its resistance
at a lower level than before (4), forming the descending angle of the
triangle.

The pattern completes when the price reverses again and breaks
below (5) the established horizontal line in this pattern.

Example

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Bullish Symmetrical Triangle

As the name suggests, this is a bullish indicator and indicates the

continuation of the upward trend. The bullish asymmetrical triangle is
a common pattern seen in bullish markets.

In an uptrend, the price finds the first resistance (1) which will be the
highest price in the pattern. The price reverses and finds its first
support (2) which will be the lowest point in this pattern. The price
reverses from the first support (2) and finds the second resistance (3)
which is lower than the first resistance. These two resistance points
create the downward angle of the symmetrical triangle.

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The second support level (4) is higher than the first support (2)
and forms the upward angle of the symmetrical triangle.

The pattern completes when the price reverses direction from the
second support (4) and breaks the triangle's upper line (5).

Example

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Bullish Symmetrical Triangle

In a downtrend, the price finds its first support (1) which is the lowest
price in this pattern. The price reverses and finds its first resistance (2),
which is the highest point in this pattern.

The second support (3) is higher than the first support (1) and creates
the upward angle of this pattern. The price reverses direction and the
second resistance (4) is lower than the first resistance (2) creating the
downward angle of this pattern.

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The pattern completes when the price reverses past the bottom angle
of the pattern (5) and anticipates a lower low and bearish trend.

Example

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Bullish Rectangle

In an uptrend, the price finds its first resistance (1) which will form
the basis for a horizontal line which will be the resistance level for the
rest of the pattern.

As the price reverses, it finds its first support (2) which will also form
the basis for a horizontal line that will be the support level for the rest
of the pattern.

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As the price moves upward from its first support (2), it finds the
second resistance level (3) which is at the same or similar level as the
first resistance.

The price reverses direction moving downward and finds support (4)
at the same or similar level as the first support.

The pattern completes when the price reverses its direction, moving
upward and breaking the upper border of the pattern (5).

Example

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Bearish Rectangle

In a downtrend, the price finds its first support (1) which will form
the basis for a horizontal line that will be the support level for the
rest of the pattern.

As the price reverses, it finds its first resistance (2) which will also form
the basis for a horizontal line that will be the resistance level for the
rest of the pattern.

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The price reverses, moving downward until it finds the second
support level (3) which is at the same or similar level of support as the
first (1).

The price reverses direction, moving upward until it finds the second
level of resistance (4) which is at the same or similar level of
resistance as the first (2).

The pattern completes when the price reverses direction, moving

downward until it breaks the lower border of the pattern (5).

Example

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Cup & Handle

The cup and handle pattern indicates the continuation of a pattern

and is a bullish indicator. It is not a very common pattern.

In an uptrend, the price finds its first resistance (1) which forms the
edge of the cup pattern. The price reverses direction and in short
increments and price reversals, finds its support (2), the lowest point in
the pattern and forming the bottom of the cup.

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The price direction reverses, moving upward in short increments until
it finds the second resistance (3), which is at a similar level to the first
level of resistance (1), completing the cup formation.

The handle formation is created when the price moves downward

until it finds its support (4) which is higher than the first support level
(2).

The pattern completes when the price movement reverses, moving

upward (5), and breaks out of the cup and handle formation.

Example

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Cup & Handle (Inverted)

The cup and handle inverted pattern, as the name indicates is an

inversion of the cup and handle pattern. This pattern indicates the
continuation of a pattern and is a bearish indicator. It is not a very
common pattern.

In a downtrend, the price finds its first support (1) which forms the
edge of the (inverted) cup pattern. The price reverses direction and in
short increments and price reversals, finds its resistance (2), the
highest point in the pattern and forming the (inverted) bottom of the
cup.

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In a downtrend, the price finds its first support (1) which forms the
edge of the (inverted) cup pattern. The price reverses direction and
in short increments and price reversals, finds its resistance (2), the
highest point in the pattern and forming the (inverted) bottom of the
cup.

The price direction reverses, moving downward in short increments

until it finds the second support (3), which is at a similar level to the
first level of support (1), completing the (inverted) cup formation.

The handle formation is created when the price moves upward until
it finds its resistance (4) which is lower than the first resistance level
(2).

The pattern completes when the price movement reverses, moving

downward (5) and breaks out of the (inverted) cup and handle
formation.

Example

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Reversal Chart Patterns Cheat Sheet

Support Entry

Bearish Double Top Target

Target

Neckline
Entry

Inverse Head and Shoulders

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Reversal Chart Patterns Cheat Sheet
Target

Entry
Support

Bullish Double Bottom

Neckline
Entry

Target

Head and Shoulders

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Reversal Chart Patterns Cheat Sheet

Entry

Target

Bearish Rising Wedge

Target

Entry

Bullish Falling Wedge

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Reversal Chart Patterns Cheat Sheet

Entry

Target

Expanding triangle pattern (Bearish)

Target

Entry

Expanding triangle pattern (Bullish)

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Reversal Chart Patterns Cheat Sheet

Triple Top (Bearish)

Triple Bottom (Bullish)

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Continuation Chart Patterns Cheat Sheet
Target

Entry

Bullish Flag

Entry

Target

Bearish Flag

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Continuation Chart Patterns Cheat Sheet

Bearish Pennant

Bullish Pennant

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Continuation Chart Patterns Cheat Sheet

Ascending Triangle

Descending Triangle

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Continuation Chart Patterns Cheat Sheet

Bullish Symmetrical Triangle

Entry

Target

Bearish Rising Wedge

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