Pathshala: Reversal Patterns

Chart Analysis - Common Chart Patterns - Reversal

<div dir="ltr" style="text-align: left;" trbidi="on">
<h3>
 
Common Reversal Chart Patterns</h3>

<ol style="text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBYSqja6eZW-z7jRxySqtTP6x3Le9vE96ZNW7JD6Zxm_rhQrgsXY0PwF2xjCA-XuFbFjccQnRW2UixeoHXAZiK8g4PGtTXRqXPo7xjyt1Mf5PtfP19yTg1zWRbfRJt7cEL_O2hz3T-1i8/s1600/fxtimes-continuation-bilateral-chart-pattern.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1131" data-original-width="1600" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBYSqja6eZW-z7jRxySqtTP6x3Le9vE96ZNW7JD6Zxm_rhQrgsXY0PwF2xjCA-XuFbFjccQnRW2UixeoHXAZiK8g4PGtTXRqXPo7xjyt1Mf5PtfP19yTg1zWRbfRJt7cEL_O2hz3T-1i8/s320/fxtimes-continuation-bilateral-chart-pattern.png" width="320" /></a>
<li class="MsoNormal" style="line-height: normal;">Double Top Reversal (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Double Bottom Reversal (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Head and Shoulders Top (Bearish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Head and Shoulders Bottom (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Falling Wedge (Bullish Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Rising Wedge (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Rounding Bottom (Long Term Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Triple Top Reversal (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Triple Bottom Reversal (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal;">Bump and Run Reversal (Bearish
 Reversal)</li>
</ol>
 
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Double Top Reversal (Bearish Reversal)

</h2>
</li>
</ul>
<h4>
What is Double
Top Pattern?</h4>

A double top is a trend reversal chart
pattern formed after good bullish price move (a continuous price move for a
good duration) where the upward price movement loses its steam (first top) and
it retraces a bit (to neckline or midpoint). Then again it moves in direction of
original trend and reaches the first top-level
thereby forming the second top. It again cannot move above the first top and start moving to the neckline. Once the neckline is broken its fall in price is steep.
 
Understanding Double top in details
A double top is formed when the stock
moves up for many days and the movement is steep towards the end. And then it
falls from there by about 10-15 %. After this,
it again tries to move up and reaches the level
of previous high but cannot cross its previous high. After this, it again starts falling to a level of the
neckline. Once it retraces below neckline
a downtrend starts.

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk9IwheK-EPuSP474BBpagOfnjGja31Qmbk0S4G8qmuD9fDvQC6OpD5PD599_V5TerjbfMd8xaMRtJ6e00A_0jgq51b4iC9B9yMa_bAFpQQ0j3ptm0ExRwozjx6Dqe7XMOVu0u20RdE0Y/s1600/DoubleTopSampleImage.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="281" data-original-width="401" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk9IwheK-EPuSP474BBpagOfnjGja31Qmbk0S4G8qmuD9fDvQC6OpD5PD599_V5TerjbfMd8xaMRtJ6e00A_0jgq51b4iC9B9yMa_bAFpQQ0j3ptm0ExRwozjx6Dqe7XMOVu0u20RdE0Y/s1600/DoubleTopSampleImage.png" /></a>Please note that in
actual practice, the two top may not be exactly at the same level. Generally, the second top is a slightly lower level but 1-2 %
higher then the first level is also
acceptable. A significant higher second top may be dealt with a lot of suspicions
as it may indicate a continuation of the uptrend</div>

Volume in double Top has a lot of significance as it can help to
confirm the formation of the pattern.
Volume during first top should generally be much higher than volume during
second top formation and volume during midpoint formation should be much lower
than volume during neckline break out. Please avoid aggressive positioning when
the volume is not supporting the move.
For aggressive traders, a strict stop
loss is recommended.

<div style="text-align: justify;">
It is very fairly common to see a pullback
near to neckline after formation of the
pattern. It should generally be seen as a healthy thing as it gives better
confirmation of neckline as resistance. In some case,
the pullback may happen few times. If
this happens too many times then it may not be a typical double top pattern. In case of pullback, it is recommended
to keep a stop loss of about 3% above neckline.</div>
<div style="text-align: justify;">
 </div>

Volume in double Top has a lot of significance as it can help to
confirm the formation of the pattern.
Volume during first top should generally be much higher than volume during
second top formation and volume during midpoint formation should be much lower
than volume during neckline break out. Please avoid aggressive positioning when
the volume is not supporting the move.
For aggressive traders, a strict stop
loss is recommended.

<div style="text-align: justify;">
It is very fairly common to see a pullback
near to neckline after formation of the
pattern. It should generally be seen as a healthy thing as it gives better
confirmation of neckline as resistance. In some case,
the pullback may happen few times. If
this happens too many times then it may not be a typical double top pattern. In case of pullback, it is recommended
to keep a stop loss of about 3% above neckline.</div>

<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Double Bottom Reversal (Bullish Reversal)</h2>
</li>
</ul>
What is Double Bottom Pattern? Double
 Bottom is a bullish trend reversal chart pattern formed after good 
bearish price move (a continuous price down for a good duration) where 
the downward price movement looses its steam (first bottom) and it 
retraces a bit (to neck line or mid point). Then again it moves 
in direction of original trend and reaches the first bottom level there 
by forming second bottom. It again cannot move down first bottom and 
start moving to neckline. Once the neck line is broken uptrend is seen. Understanding
 Double Bottom in details Double bottom is formed when the stock moves 
down for many days and the movement is steep towards the end. And then 
it goes up from there by about 10-15% . After this it again tries to 
move down and reaches level of previous low but cannot cross its 
previous low. After this it again starts going up to a level of 
neckline. Once it retraces above neckline a uptrend starts. 
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi41D9MWG4BS785jzqvTUrA1JOQjK_mg-WtxvZNo_7TyzzjOHx5GI2Gp2-G78uGMTVlTHXPIcnoGA6S932LsvHG9hr_0os-M0PbJMPt47SaY9Zu5OylUR6iEWlAOS5BxBfg2dSrj_LC7B4/s1600/DoubleBottomSampleImage.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="296" data-original-width="402" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi41D9MWG4BS785jzqvTUrA1JOQjK_mg-WtxvZNo_7TyzzjOHx5GI2Gp2-G78uGMTVlTHXPIcnoGA6S932LsvHG9hr_0os-M0PbJMPt47SaY9Zu5OylUR6iEWlAOS5BxBfg2dSrj_LC7B4/s1600/DoubleBottomSampleImage.png" /></a> Please
 note that in actual practice, the two bottom may not be exactly at same
 level. Generally, second bottom is a slightly higher level but 1-2 % 
lower then first level is also acceptable. A significant lower second 
bottom may be dealt with lot of suspicion as it may indicate 
continuation of downtrend. Shape of the bottoms can be from sharp and 
pointed to rounds one. 
 
Volume
 in double bottom has a lot of significance as it can help to confirm 
formation of the pattern. Volume during first bottom should generally be
 much higher than volume during second bottom formation and volume 
during midpoint formation should be much lower than volume during 
neckline break out. Please avoid aggressive positioning when volume is 
not supporting the move. For aggressive traders a strict stop loss is 
recommended. It is very fairly common to see a pull-up near to 
neck line after formation of the pattern. It should generally be seen as
 a healthy thing as it gives better confirmation of neckline as 
resistance. In some case the pull up may happen few times. If this 
happens too many times then it may not be typical double bottom pattern.
 In case of pull-up, it is recommended to keep a stop loss of about 3% 
below neck line. Double bottom formation generally happens when 
knowledgeable investor sense value in stock and start selling thus 
resulting in slow and steady decrease in price with gradual down in 
price. Seeing the trend many more people jump in to make quick bucks by 
short selling. This leads to lower jump in price. Once this is known to 
lot of uninformed people, they jump in and moves the price to a very low
 level (bottom 1). But this price is unsustainable and smart 
investors starts booking profit resulting in increase in price to a 
level of midpoint. To lot of uninformed people who missed the boat 
during first rally, jump in considering it 'sell' opportunity and 
results is decrease in the price to previous low but this time volume is
 less. As the lower point is unsustainable, the price hike to neckline 
where it may get some resistance. Once the neckline is broken with good 
volume a typical trend reversal starts to reach a fair value but the 
upward momentum can take it to upper fair price range and thereby making
 a classic double bottom pattern. 
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Head and Shoulder Top ( Bearish Reversal)</h2>
</li>
</ul>
<div class="MsoNormal">
Head and Shoulder pattern is a very reliable pattern and
that is reason of its popularity. It is a reversal pattern and is formed after
an uptrend.</div>

<div class="MsoNormal">
Head and Shoulder pattern consist of the following:</div>

<div class="MsoNormal">
1. Left Shoulder: In continuation of the uptrend the price
goes up to forms a new high or first peak known as left shoulder and then make
a low.</div>

<div class="MsoNormal">
2. Head: Continuing the left shoulder low, again the price
goes up to a new high, higher than the left shoulder forming a middle peak
called as head of the pattern and come down.</div>

<div class="MsoNormal">
3. Right Shoulder: It is formed when the price goes up again
from the low of the head but not as high as the Head and comes down forming
third peak or right shoulder.</div>

<div class="MsoNormal">
4. Neckline: It is the line drawn through the bottom of the
the Left Shoulder, Head and the Right Shoulder and serves as an important
support for this pattern.</div>

<div class="MsoNormal">
Breakout: The pattern is only considered reliable and
complete when the price goes down and closes below the neckline and there is
often increase in Volume.</div>

<div class="MsoNormal">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeiBQsbLVQB4zI6euzbOX88oOmdA0kuWX9eYhEKP1PoyJsBz_pU8clgRKIOvZ2marFlJ85dbLL_AYPLdJPDWSIWGVNgS8zgqkyter3u5nf_T1R4bXxI_kr_yUvaLPBaUnxCMMavX1_Kr0/s1600/HeadAndShoulderSampleImage.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="299" data-original-width="373" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeiBQsbLVQB4zI6euzbOX88oOmdA0kuWX9eYhEKP1PoyJsBz_pU8clgRKIOvZ2marFlJ85dbLL_AYPLdJPDWSIWGVNgS8zgqkyter3u5nf_T1R4bXxI_kr_yUvaLPBaUnxCMMavX1_Kr0/s1600/HeadAndShoulderSampleImage.png" /></a>Shape: Theoretically Head and Shoulder pattern should be
symmetrical. It means that the left and right shoulders should form peak about
the same price level and are equally distanced from the Head. But practically
you rarely seen such symmetrical Head and Shoulder patterns in real time.
However sometimes the left shoulder is higher then the right shoulder or vice
verse. But the head always have the highest peak. It is not necessary also that
the peaks formed in this pattern to be sharp, it may be pointed to round shape.
And therefore it is not necessary that neckline should be horizontal, it can be
sloping upwards or downwards.</div>

<div class="MsoNormal">
 </div>
<div class="MsoNormal">
Volume: With the formation of Head and Shoulder there is
continuous decrease in the volume. That means volume will be higher in the left
shoulder and eventually it decreases with the formation of head and right
shoulder.</div>

<div class="MsoNormal">
Breakout Range: This is the vertical distance from the tip of
the head till the neckline. It is usually used to set the rough</div>

<div class="MsoNormal">
potential price target however other technical indicators
must also be considered here as well.</div>
 
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEYEkW471s_4_na7Vtv5eXT8zYlOkmqcGF5h5K5bHlAwuRV6kHr3TdqazWUC5DjFMOkmkADx96Jn1KqsXuOC6rTxPylp4ZiEQ-EVhDMd1aRK9TZ8KUnVqpZpUOCHoy2JSJb0A08ygNjxI/s1600/VSTIndustriesLtdHeadAndShoulderPatternFormation.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="498" data-original-width="709" height="280" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEYEkW471s_4_na7Vtv5eXT8zYlOkmqcGF5h5K5bHlAwuRV6kHr3TdqazWUC5DjFMOkmkADx96Jn1KqsXuOC6rTxPylp4ZiEQ-EVhDMd1aRK9TZ8KUnVqpZpUOCHoy2JSJb0A08ygNjxI/s400/VSTIndustriesLtdHeadAndShoulderPatternFormation.png" width="400" /></a></div>
<div class="MsoNormal" style="text-align: left;">
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Head & Shoulder Bottom (Bullish Reversal)</h2>
</li>
</ul>
<div style="text-align: left;">

</div>
Reverse Head And Shoulder Pattern is just opposite of Head and Shoulder
Pattern. It is also a very reliable pattern and that is reason of its
popularity. It is a reversal pattern and is formed after a downtrend. Reverse
Head and Shoulder pattern consist of the following: 
1.Left Shoulder: In continuation of the downtrend the price goes
down further to forms a new low or first peak known as left shoulder and then
make a high. 
2.Head: Continuing the left shoulder high, again the price goes
down to a new low, lower than the left shoulder forming a middle peak called as
head of the pattern and goes up to the previous high. 
3.Right Shoulder: It is formed when the price goes down again
from the high of the head but not as low as the Head and comes up again forming
third peak or right shoulder. 
4.Neckline: It is the line drawn through the top of the the Left
Shoulder, Head and the Right Shoulder and serves as an important support for
this pattern.

<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxYcEJJb0H-xoA2jtlXk_xP5RRb4TUZN0RJs0APC2PfywmK4Uq8G8rOQ5m-1Uiz0g9m8KNXITkr4or7x17Fc0cPVtvwyXlwgfzt6gQw93pYFhbZlpkSPM1TYSDuZZ2kNE7YnVkYKvhbEc/s1600/ReverseHeadAndShoulderSampleImage.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="289" data-original-width="380" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxYcEJJb0H-xoA2jtlXk_xP5RRb4TUZN0RJs0APC2PfywmK4Uq8G8rOQ5m-1Uiz0g9m8KNXITkr4or7x17Fc0cPVtvwyXlwgfzt6gQw93pYFhbZlpkSPM1TYSDuZZ2kNE7YnVkYKvhbEc/s1600/ReverseHeadAndShoulderSampleImage.png" /></a>Breakout: The pattern is only considered reliable and complete when
the price goes up and closes above the neckline and there is often increase in
Volume. 
Shape: Theoretically Head and Shoulder pattern should be symmetrical. It
means that the left and right shoulders should form peak about the same price
level and are equally distanced from the Head. But practically you rarely saw
such symmetrical Head and Shoulder patterns in real time. However sometimes the
left shoulder is higher than the right shoulder or vice verse. But the head
always have the highest peak. It is not necessary also that the peaks formed in
this pattern to be sharp, it may be pointed to round shape. And therefore it is
not necessary that neckline should be horizontal, it can be sloping upwards or
downwards. 
Volume: With the formation of Reverse Head and Shoulder there is
continuous decrease in the Volume.That means volume will be higher in the left shoulder and eventually it
decreases with the formation of head and right shoulder. 
Breakout Range: This is the vertical distance from the tip of the head
till the neckline. It is usually used to set the rough potential price target
however other technical indicators must also be considered here as well. 
 
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheXpdk2kIX8NcPFPxGMzV4wOd9RGDnYMfBoXZwsh9r38ZQyNAb0bC2nxkJpYSdnW-nLfB7lqR2JWBImcsXtXy7-8Kq92qDm-mbf2lHNqzdKUzjfqEDOJ5mnCEUgDV8CdtPSXlYmQYcqjg/s1600/Mahindra%2526MahindraLtdReverseHeadAndshouldersPatternFormation.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="429" data-original-width="596" height="287" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheXpdk2kIX8NcPFPxGMzV4wOd9RGDnYMfBoXZwsh9r38ZQyNAb0bC2nxkJpYSdnW-nLfB7lqR2JWBImcsXtXy7-8Kq92qDm-mbf2lHNqzdKUzjfqEDOJ5mnCEUgDV8CdtPSXlYmQYcqjg/s400/Mahindra%2526MahindraLtdReverseHeadAndshouldersPatternFormation.png" width="400" /></a></div>


 
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Falling Wedge (Bullish Reversal)</h2>
</li>
</ul>
The
 Falling Wedge is a bullish pattern that begins wide at the top and 
contracts as prices move lower. This price action forms a cone that 
slopes down as the reaction highs and reaction lows converge. In 
contrast to symmetrical triangles,
 which have no definitive slope and no bias, falling wedges definitely 
slope down and have a bullish bias. However, this bullish bias cannot be
 realized until a resistance breakout.

The falling wedge can also fit into the continuation category. As a 
continuation pattern, the falling wedge will still slope down, but the 
slope will be against the prevailing uptrend. As a reversal pattern, the
 falling wedge slopes down and with the prevailing trend. Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns. 
 
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjojnwijKb7b27jcEiaUEUbA24s6rfct-e4jPha3UY67Ylpebb7pm6ybJEjiK0cMP3qZetiHIapG-9j2BVbBACYTHMbYmcKank5Arf52xJVfA6UovasnoDTVsbNv0T3KKkrdajNwRIPO-8/s1600/fallingwedge-rdc.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="568" data-original-width="514" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjojnwijKb7b27jcEiaUEUbA24s6rfct-e4jPha3UY67Ylpebb7pm6ybJEjiK0cMP3qZetiHIapG-9j2BVbBACYTHMbYmcKank5Arf52xJVfA6UovasnoDTVsbNv0T3KKkrdajNwRIPO-8/s1600/fallingwedge-rdc.png" /></a> 
 
<ol>
<li class="level1"><div class="li">
Prior Trend: To 
qualify as a reversal pattern, there must be a prior trend to reverse. 
Ideally, the falling wedge will form after an extended downtrend and 
mark the final low. The pattern usually forms over a 3-6 month period 
and the preceding downtrend should be at least 3 months old. 
 
</div>

</li>
<li class="level1"><div class="li">
Upper Resistance Line:
 It takes at least two reaction highs to form the upper resistance line,
 ideally three. Each reaction high should be lower than the previous 
highs.
 
</div>
</li>
<li class="level1"><div class="li">
Lower Support Line:
 At least two reaction lows are required to form the lower support line.
 Each reaction low should be lower than the previous lows.
 
</div>
</li>
<li class="level1"><div class="li">
Contraction: The 
upper resistance line and lower support line converge to form a cone as 
the pattern matures. The reaction lows still penetrate the previous 
lows, but this penetration becomes shallower. Shallower lows indicate a 
decrease in selling pressure and create a lower support line with less 
negative slope than the upper resistance line.
 
</div>
</li>
<li class="level1"><div class="li">
Resistance Break: 
Bullish confirmation of the pattern does not come until the resistance 
line is broken in convincing fashion. It is sometimes prudent to wait 
for a break above the previous reaction high for further confirmation. 
Once resistance is broken, there can sometimes be a correction to test 
the newfound support level.
 
</div>
</li>
<li class="level1"><div class="li">
Volume: While volume is not particularly important on rising wedges,
 it is an essential ingredient to confirm a falling wedge breakout. 
Without an expansion of volume, the breakout will lack conviction and be
 vulnerable to failure. 
</div>
</li>
</ol>

As with rising wedges, the falling wedge can be one of the most 
difficult chart patterns to accurately recognize and trade. When lower 
highs and lower lows form, as in a falling wedge, a security remains in a
 downtrend. The falling wedge is designed to spot a decrease in downside momentum and alert technicians to a potential trend reversal.
 Even though selling pressure may be diminishing, demand does not win 
out until resistance is broken. As with most patterns, it is important 
to wait for a breakout and combine other aspects of technical analysis 
to confirm signals.  
 
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUCaFp6cL2UN1KLi4DE1Q-x3UngYyjNhc7GKHtEdqCoGTLdqZ-xR5D8By_OMvkcmOIlklwyEbdTbfU7qG_m7mUi1c8m0P8U1kxJmBLjYp6rV3YH8SLqgPykf28DLOIZz7fJ76qTzad-Fc/s1600/fallingwedge-fcx.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="568" data-original-width="517" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUCaFp6cL2UN1KLi4DE1Q-x3UngYyjNhc7GKHtEdqCoGTLdqZ-xR5D8By_OMvkcmOIlklwyEbdTbfU7qG_m7mUi1c8m0P8U1kxJmBLjYp6rV3YH8SLqgPykf28DLOIZz7fJ76qTzad-Fc/s1600/fallingwedge-fcx.png" /></a></div>

FCX provides a textbook example of a falling wedge at the end of a long downtrend.
 


 
<ul>
<li class="level1"><div class="li">
Prior Trend: The 
downtrend for FCX began in the third quarter of 1997. There was a brief 
advance in Mar-98, but the downtrend resumed and the stock was trading 
at new lows by Feb-99.
 
</div>
</li>
<li class="level1"><div class="li">
Upper Resistance Line: The upper resistance line formed with four successively lower peaks.
 
</div>
</li>
<li class="level1"><div class="li">
Lower Support Line: The lower support line formed with four successive lower lows.
 
</div>
</li>
<li class="level1"><div class="li">
 Contraction: The 
upper resistance line and lower support line converged as the pattern 
matured. Even though each low is lower than the previous low, these lows
 are only slightly lower. The shallowness of the new lows indicates that
 demand is stepping almost immediately after a new low is recorded. The 
supply overhang remains, but slope of the upper resistance line is more 
negative than the lower support line. 
 
</div>

</li>
<li class="level1"><div class="li">
Resistance Break: 
In contrast to the three previous lows, the late February low was flat 
and consolidated just above 9 for a few weeks. The subsequent breakout 
in March occurred with a series of strong advances. In addition, there 
was a positive divergence in the PPO.
 
</div>
</li>
<li class="level1"><div class="li">
Volume: After the 
large volume decline on 24-Feb (red arrow), upside volume began to 
increase. Above-average volume continued on advancing days and when the 
stock broke trend line resistance. Money flows confirmed the strength by
 surpassing their Nov-98 high and moving to their highest level since 
Apr-98.
 
</div>
</li>
<li class="level1"><div class="li">
 After the trend line breakout, there
 was a brief pullback to support from the trend line extension. The 
stock consolidated for a few weeks and then advanced further on 
increased volume again.</div>
</li>
</ul>
<div style="text-align: left;">
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Rising Wedge (Bearish Reversal)</h2>
</li>
</ul>
</div>
<div style="text-align: left;">
The
 Rising Wedge is a bearish pattern that begins wide at the bottom and 
contracts as prices move higher and the trading range narrows. In 
contrast to symmetrical triangles, which have no definitive slope and no
 bullish or bearish bias, rising wedges definitely slope up and have a 
bearish bias.</div>
<div style="text-align: left;">
Even
 though this article will focus on the rising wedge as a reversal 
pattern, the pattern can also fit into the continuation category. As a 
continuation pattern, the rising wedge will still slope up, but the 
slope will be against the prevailing downtrend. As a reversal pattern, 
the rising wedge will slope up and with the prevailing trend. Regardless of the type (reversal or continuation), rising wedges are bearish.  </div>
<div style="text-align: left;">
<div style="text-align: center;">
<div style="text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5B9TTZcDToIGNGvVfIb6ILt7H4EqSU_Ra8YKgQfGlagEY_cwQw1EGIWgKas1wxK6cqwKo4s-WlAPxYB70kRa9c_942qRSyAS9cDRtc7ekirIScP7BZU7fVx8wEVbsmQqHG84r1vTNMtw/s1600/1.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="504" data-original-width="457" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5B9TTZcDToIGNGvVfIb6ILt7H4EqSU_Ra8YKgQfGlagEY_cwQw1EGIWgKas1wxK6cqwKo4s-WlAPxYB70kRa9c_942qRSyAS9cDRtc7ekirIScP7BZU7fVx8wEVbsmQqHG84r1vTNMtw/s1600/1.png" /></a>     </div>
</div>
          
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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<div style="text-align: left;">
 </div>
<div style="text-align: left;">
Upper Resistance Line:
 It takes at least two reaction highs to form the upper resistance line,
 ideally three. Each reaction high should be higher than the previous 
high.         Lower Support Line: At least two reaction 
lows are required to form the lower support line. Each reaction low 
should be higher than the previous low.         Contraction:
 The upper resistance line and lower support line converge as the 
pattern matures. The advances from the reaction lows (lower support 
line) become shorter and shorter, which makes the rallies unconvincing. 
This creates an upper resistance line that fails to keep pace with the 
slope of the lower support line and indicates a supply overhang as 
prices increase.         Support Break: Bearish 
confirmation of the pattern does not come until the support line is 
broken in a convincing fashion. It is sometimes prudent to wait for a 
break of the previous reaction low. Once support is broken, there can 
sometimes be a reaction rally to test the newfound resistance level.         Volume:
 Ideally, volume will decline as prices rise and the wedge evolves. An 
expansion of volume on the support line break can be taken as bearish 
confirmation.     The rising wedge can be one of the most difficult 
chart patterns to accurately recognize and trade. While it is a 
consolidation formation, the loss of upside momentum on each successive 
high gives the pattern its bearish bias. However, the series of higher 
highs and higher lows keeps the trend inherently bullish. The final 
break of support indicates that the forces of supply have finally won 
out and lower prices are likely. There are no measuring techniques to 
estimate the decline – other aspects of technical analysis should be 
employed to forecast price targets.   
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 ANN provides a good example of the rising wedge as a reversal 
pattern that forms in the face of weakening momentum and money flow.     Prior Trend:
 From a low around 10 in Oct-98, ANN surpassed 23 in less than 7 months.
 The final leg up was a sharp advance from below 15 in Feb. to 23.5 in 
mid-April.     Upper Resistance Line: The upper resistance line formed with three successively higher peaks.     Lower Support Line: The lower support line formed with three successive higher lows.     Contraction:
 The upper resistance line and lower support line converged as the 
pattern matured. A visual assessment confirms that the slope of the 
lower support line is steeper than that of the upper resistance line. 
Less slope in the upper resistance line indicates that momentum is 
waning as the stock makes new highs.     Support Break: 
The stock hugged the support line for over a week before finally 
breaking with a sharp decline. The previous reaction low was broken a 
few days later with long black candlestick (red arrow).     Volume:
 Chaikin Money Flow turned negative in late April and was well below 
-10% when the support line was broken. There was an expansion of volume 
when the previous reaction low was broken. Support from the April
 reaction low around 20 turned into resistance and the stock tested this
 level in early July before declining further.</div>
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Rounding Bottom (Long Term Bullish Reversal)</h2>
</li>
</ul>
<h5>
The Rounding Bottom is rarely seen intraday and 
occurs most often on weekly charts. It is a great reversal pattern that 
you should keep an eye on after a stock has sold off for 1-2 years</h5>
The Rounding Bottom chart pattern analysis is usually conducted on a 
weekly chart. This is because this pattern is associated with a longer 
period of consolidation. Rounding bottoms start out with the bias to the
 down side but then as the trend is established and the pattern develops
 it turns its bias to the long side. 

You can identify the Rounding Bottom pattern when doing your chart 
analysis with its saucer shaped bottom which is formed slightly less 
aggressive than other bottoming reversal patterns. 


 
<h4 style="text-align: left;">
Powerful Reversal Pattern</h4>

The pattern does not vary too much in its development but can 
sometimes be mistaken at first as having similar characteristics as the Inverted Head and Shoulders.
 The difference arises with its saucer shaped bottom which develops over
 a longer term stopping it from becoming a V pivot (Bottom). 

Support areas of the Rounding Bottoms are often harder to pin point 
from a chart analysis's point of view as like a V pivot you only get one
 reference point to mark as support.

<h4 style="text-align: left;">
Key Points in Formation:</h4>


 
<ol>
<li>Establish Trend - like any other reversal 
pattern there must be a long term established trend to reverse. Rounding
 Bottoms have to be formed after a significant long term down trend.</li>
<li>Left Side Decline - This decline is the first part
 of the price move and it has a tendency to be slightly volatile with 
multiple lower highs and lower lows. This is where the confusion can 
firstly begin of whether it is an Inverted Head and shoulder.</li>
<li>Low - After you have seen the progressive left 
decline, the low of the Rounding Bottom will start to be formed. This 
will be over a number of weeks so it does not appear to be a V pivot 
(bottom). This is what I deem to be the first confirmation of the 
Rounding Bottom Pattern.</li>
<li>Right Side Incline - For the incline to be 
confirmed it has to follow about the same time frame as what the left 
side decline took to fall to the low. As mentioned above if the incline 
is too steep the pattern may be in question.</li>
<li>Resistance - Analysing chart pattern resistance is
 all about looking to the left. The Rounding Bottom is no different and 
you can get your first major area of resistance plotted where left side 
decline starts which will be last major lower pivot high. On fig.1 we 
draw our resistance trend line horizontal from that point to where price
 action will meet from the right side incline.</li>
<li>Breakout - This is the confirmation that price 
action will continue to the upside breaking the last major lower high 
pivot which is our resistance trendline. Confirmation still needs to be 
that the price closes outside the resistance area. You can often see 
price returning to test the resistance trendline but it does not 
necessarily have to.</li>
</ol>
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMdqFWe-dS2rzvYt91VaB2AoqlRqQSzZzPpiuHgyyNckwFNuN9TzvipN25hMGZ-pOiobJMbYc_lk_hMdCNljhjUxEtQAsb3emPAkW1F90D86VM47H9cOmsixsf-1m4sqqMXA2IbLI5Ops/s1600/1.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="944" data-original-width="1274" height="296" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMdqFWe-dS2rzvYt91VaB2AoqlRqQSzZzPpiuHgyyNckwFNuN9TzvipN25hMGZ-pOiobJMbYc_lk_hMdCNljhjUxEtQAsb3emPAkW1F90D86VM47H9cOmsixsf-1m4sqqMXA2IbLI5Ops/s400/1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Powerful reveral pattern</td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: left;">
Styles Traded - How can it be Traded:
 
<ol>
<li>Entry - Price breaks resistance area and closes
 above. This has a bigger stop loss but is more confirmation that it's 
on its way down.</li>
<li>Might Miss - Price retests the resistance trendline which now becomes support area.</li>
</ol>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiU4Cx-ZO_TxJd9T2Ivx6X2bWq1iKSks65LKQ-1XcCjvWCV8SXTd3jHKwZB9ZK4cEIbFz24KC_cefCnBvEtjnukabWhNmG1JUhta9E2jkAQhOkR9Jg34qLmBtg6QCisNOjGZeiU0EHabc/s1600/2.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="944" data-original-width="1274" height="296" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiU4Cx-ZO_TxJd9T2Ivx6X2bWq1iKSks65LKQ-1XcCjvWCV8SXTd3jHKwZB9ZK4cEIbFz24KC_cefCnBvEtjnukabWhNmG1JUhta9E2jkAQhOkR9Jg34qLmBtg6QCisNOjGZeiU0EHabc/s400/2.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">How to trade the Rounding Bottom</td></tr>
</tbody></table>
Both trading style entries have their strength
 and weaknesses and will come down to the trading style of the 
individual trader and their tolerance to money management (R&R).</div>
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Triple Top Reversal (Bearish Reversal)</h2>
</li>
</ul>
What is Triple Top Chart Pattern? Triple
 Top Pattern is very reliable, bearish reversal pattern. It is formed 
after an uptrend. It consists of three consecutive peaks or tops formed 
at a regular interval and of almost the same heights. 1.Top One:
 Top one or peak one is formed in continuation of the uptrend. There is a
 formation of new high followed by a pull back(10-20%) till the 
neckline(Support). 2.Top Two: Price again moves from neckline 
to make another high called the second top or peak 2 or resistance 2 
followed by a pull back(10-20%) again till the neckline. 3.Top Three: Third top or third peak is formed when the price movers towards the resistance for the third time before giving a breakout. 4.Neckline Support:
 It is the line drawn through the bottom of the top one, top two till 
the top three. It serves as a important support to the pattern 
 
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijICXxzbAcNmvIXBeaPXalpqqDKtlINsF5sSAqNXogX0AEFy3Ax4S8oKhaLR3AtyYGKeT0QGqdOD4idfNO2uhcELiKy-W0x2cdAKDgzKnOFUey9OCH-8lfkcC4a8l2jwFTjXWa6uuChFg/s1600/TripleTopSampleImage.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="270" data-original-width="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijICXxzbAcNmvIXBeaPXalpqqDKtlINsF5sSAqNXogX0AEFy3Ax4S8oKhaLR3AtyYGKeT0QGqdOD4idfNO2uhcELiKy-W0x2cdAKDgzKnOFUey9OCH-8lfkcC4a8l2jwFTjXWa6uuChFg/s1600/TripleTopSampleImage.png" /></a> Understanding Triple Top Chart Pattern: 
 Triple
 top chart pattern is formed when the buyers have faith in the stock and
 take the price to a new high (Top1) but fails to continue so due to the
 resistance, results in a pull back. Again the buyers tries to rise the 
price but fails to get enough momentum to further increase the price 
result in a second pull back. Same sentiments of buyers are involved in 
the formation of third top. After all this attempts buyers looses their 
faith and sellers took over buyers resulting in the fall in price and 
reverse in the trend. Duration: It takes several minutes to several 
months for this pattern to be formed. The longer the duration the more 
reliable the pattern is, after the breakout occurs. Shape:
 Theoretically the triple top should be symmetrical that means all the 
three tops should be of nearly equal heights and spaced almost equally 
from each other. However practically the three highs are not necessarily
 of equal heights and spaced equally from each other. The tip of the top
 may be from pointed to round shape and hence for the neckline also its 
not necessary to be horizontal, it can be sloping upwards or downwards. Breakout:It
 is very important for this pattern confirmation. Triple top is 
considered reliable only when the price closes below the neckline 
support or the confirmation point(lowest low of the pattern) and there 
is often high jump in volume. If the price don't close below the 
confirmation point then it may not be a triple top pattern. One can 
often seen a pull back after a breakout which is in support of this 
pattern formation. However the important thing to note is the pull back 
is to test the neckline support which later becomes the resistance. It 
is always advisable to keep a stop loss in a pull back. 
 Volume:
 It plays a crucial role in confirming the pattern. With the formation 
of triple top chart pattern there is a decrease in volume. Therefore 
generally the volume is higher in the first peak, followed by second 
peak and third peak. A decrease in volume indicates that the buyers are 
loosing interest which is favorable to the formation of the pattern. 
Near breakout there in an increase in volume which further confirms the 
reliability of the pattern. 
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaBunuxFevR7Jph3gzNj3ltf8P0DoAOY2ReRCAodvvy-sux7P_hxO-q-WnqIHuPBo1OiYDz8mcopUl8FKSjNeEKPq5YVcfbxU-Fr0HuIbkIjV58hjO5_Scq2G16g8mLB7XW1O-yJ0pSwU/s1600/ExideIndustriesLtdTrippleTopPatternFormation.png" style="margin-left: 1em; margin-right: 1em;"></a>Price Target:A rough price target can
 be calculated by measuring the vertical distance between the highest 
peak (resistance) and the neckline support. However other technical 
indicators have to keep in mind here as well. 
<div style="text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaBunuxFevR7Jph3gzNj3ltf8P0DoAOY2ReRCAodvvy-sux7P_hxO-q-WnqIHuPBo1OiYDz8mcopUl8FKSjNeEKPq5YVcfbxU-Fr0HuIbkIjV58hjO5_Scq2G16g8mLB7XW1O-yJ0pSwU/s1600/ExideIndustriesLtdTrippleTopPatternFormation.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="497" data-original-width="708" height="280" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaBunuxFevR7Jph3gzNj3ltf8P0DoAOY2ReRCAodvvy-sux7P_hxO-q-WnqIHuPBo1OiYDz8mcopUl8FKSjNeEKPq5YVcfbxU-Fr0HuIbkIjV58hjO5_Scq2G16g8mLB7XW1O-yJ0pSwU/s400/ExideIndustriesLtdTrippleTopPatternFormation.png" width="400" /></a></div>
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
Triple Bottom Reversal (Bullish Reversal)</h2>
</li>
</ul>
What is Triple Bottom Chart Pattern?
 
<div align="justify" style="text-align: justify;">

Triple Bottom Pattern is very reliable, bullish reversal pattern. It is formed after an downtrend. It consists of three consecutive bottoms formed at a regular interval and of almost the same heights.
1.Bottom One: Bottom one is formed in continuation of the 
downtrend. There is a formation of new low followed by a pull 
back(10-20%) till the neckline(Resistance).
2.Bottom Two: Price again moves from neckline to make another low
 called the second bottom or followed by a pull back(10-20%) again 
till the neckline.
3.Bottom Three: Third bottom is formed when the price movers towards the resistance for the third time before giving a breakout.
4.Neckline Resistance: It is the line drawn through the first bottom till the third bottom. It serves as a important resistance to the pattern.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA8rVo6tSR_BvTBRUN4zDMSPWgcHv1uZifhoL2IObhpqEd9Gd3FdngZ_m37qPePQtcxM7khOgDktCrxF2f1yimrSJDcmVdzsBetFh6MiECJeccEMyyM5SiRca_hMGVyKZk_qcREbRp9E4/s1600/TripleBottomSampleImage.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="275" data-original-width="418" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA8rVo6tSR_BvTBRUN4zDMSPWgcHv1uZifhoL2IObhpqEd9Gd3FdngZ_m37qPePQtcxM7khOgDktCrxF2f1yimrSJDcmVdzsBetFh6MiECJeccEMyyM5SiRca_hMGVyKZk_qcREbRp9E4/s1600/TripleBottomSampleImage.png" /></a></div>
<div align="justify" style="text-align: justify;">
 </div>
<div align="justify" style="text-align: justify;">
Understanding Triple Bottom Chart Pattern:

Triple bottom chart pattern is formed when the sellers have faith that 
the stock price will go down further which leads to a new low (bottom1) 
but fails to continue so, due to the Support Basics,
 results in a pull back. Again the sellers tries to reduce the price 
but fails to get enough momentum to further decrease the price which 
results in a second pull back. Same sentiments of sellers are involved 
in the formation of third bottom. After all this attempts sellers looses
 their faith and buyers took over sellers resulting in the rise in price
 and reverse in the trend.

Duration: It takes several minutes to several months for this 
pattern to be formed. The longer the duration the more reliable the 
pattern is, after the breakout occurs.

Shape: Theoretically the triple bottom should be symmetrical that
 means all the three bottoms should be of nearly equal heights and 
spaced almost equally from each other. However practically the three 
lows are not necessarily of equal heights and spaced equally from each 
other. The tip of the bottom may be from pointed to round shape and 
hence for the neckline also its not necessary to be horizontal, it can 
be sloping upwards or downwards.
</div>

<div align="justify" style="text-align: justify;">

Breakout:It is very important for this pattern confirmation. 
Triple bottom is considered reliable only when the price closes below 
the neckline support or the confirmation point(lowest low of the 
pattern) and there is often high jump in volume. If the price don't 
close below the confirmation point then it may not be a triple bottom 
pattern.

One can often seen a pull back after a breakout which is in support of 
this pattern formation. However the important thing to note is the pull 
back is to test the neckline which later becomes the support.It is 
always advisable to keep a stop loss in a pull back.

Volume:Volume
 plays a crucial role in confirming the pattern. With the formation of 
triple bottom chart pattern there is a decrease in volume. Therefore 
generally the volume is higher in the first bottom, followed by second 
bottom and third bottom. A decrease in volume indicates that the 
sellers are loosing interest which is favorable to the formation of the 
pattern. Near breakout there in an increase in volume which further 
confirms the reliability of the pattern showing that the buyers are 
taking over the sellers.

Price Target.A rough price target can be calculated by measuring 
the vertical distance between the highest bottom (support) and the 
neckline resistance. However other technical indicators have to keep in 
mind here as well.</div>
<div style="text-align: left;">
Triple Bottom Chart Pattern Formed By Sun Pharmaceutical Ltd-Example1</div>
<div style="text-align: left;">
 </div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_Cvy1fuM3eibAybBFLTfFmqRkLrUiX7NpeZOP6Tv2fuikym0kapCnnvyGma6Fbf57nVtOsBikQMq0zF6Y03rpQO6aXKtC9cNuavhy-D_5yBy1PPVN9mnul4tlrnHd9BaSLtST49uQg_U/s1600/SunPharmaceuticalLtdTrippleBottomPatternFormation.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="600" data-original-width="703" height="341" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_Cvy1fuM3eibAybBFLTfFmqRkLrUiX7NpeZOP6Tv2fuikym0kapCnnvyGma6Fbf57nVtOsBikQMq0zF6Y03rpQO6aXKtC9cNuavhy-D_5yBy1PPVN9mnul4tlrnHd9BaSLtST49uQg_U/s400/SunPharmaceuticalLtdTrippleBottomPatternFormation.png" width="400" /></a></div>
<ul style="text-align: left;">
<li><h2 style="text-align: left;">
 Bump and Run Reversal (Reversal)</h2>
</li>
</ul>
<div style="text-align: left;">
 </div>

As the name implies, the Bump and Run Reversal (BARR) is a reversal 
pattern that forms after excessive speculation drives prices up too far,
 too fast. Developed by Thomas Bulkowski, the pattern was introduced in 
the June-97 issue of Technical Analysis of Stocks and Commodities and also included in his book, the Encyclopedia of Chart Patterns.

The pattern was originally named the Bump and Run Formation, or BARF. 
Bulkowski decided that Wall Street was not ready for such an acronym and
 changed the name to Bump and Run Reversal. Bulkowski identified three 
main phases to the pattern: lead-in, bump, and run. We will examine these phases and also look at volume and pattern validation.  
 
<div class="separator" style="clear: both; text-align: center;">
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<ol>
<li class="level1"><div class="li">
Lead-in Phase: The 
first part of the pattern is a lead-in phase that can last 1 month or 
longer and forms the basis from which to draw the trend line. During 
this phase, prices advance in an orderly manner and there is no excess 
speculation. The trend line should be moderately steep. If it is too 
steep, then the ensuing bump is unlikely to be significant enough. If 
the trend line is not steep enough, then the subsequent trend line break
 will occur too late. Bulkowski advises that an angle of 30 to 45 
degrees is preferable. The size of the angle will depend on the scaling (semi-log
 or arithmetic) and the size of the chart. It is probably easier to 
judge the soundness of the trend line with a visual assessment.
 
</div>
</li>
<li class="level1"><div class="li">
Bump Phase: The 
bump forms with a sharp advance, and prices move further away from the 
lead-in trend line. Ideally, the angle of the trend line from the bump's
 advance should be about 50% greater than the angle of the trend line 
extending up from the lead-in phase. Roughly speaking, this would call 
for an angle between 45 and 60 degrees. If it is not possible to measure
 the angles, then a visual assessment will suffice.
 
</div>
</li>
<li class="level1"><div class="li">
Bump Validity: It 
is important that the bump represent a speculative advance that cannot 
be sustained for a long time. Bulkowski developed what he calls an 
“arbitrary” measuring technique to validate the level of speculation in 
the bump. The distance from the highest high of the bump to the lead-in 
trend line should be at least twice the distance from the highest high 
in the lead-in phase to the lead-in trend line. These distances can be 
measured by drawing a vertical line from the highest highs to the 
lead-in trend line. An example is provided below.
 
</div>
</li>
<li class="level1"><div class="li">
Bump Rollover: After speculation dies down, prices begin to peak and a top forms. Sometimes, a small double top
 or a series of descending peaks forms. Prices begin to decline towards 
the lead-in trend line, and the right side of the bump forms.
 
</div>
</li>
<li class="level1"><div class="li">
Volume: As the 
stock advances during the lead-in phase, volume is usually average and 
sometimes low. When the speculative advance begins to form the left side
 of the bump, volume expands as the advance accelerates.
 
</div>
</li>
<li class="level1"><div class="li">
Run Phase: The run phase begins when the pattern breaks support
 from the lead-in trend line. Prices will sometimes hesitate or bounce 
off the trend line before breaking through. Once the break occurs, the 
run phase takes over, and the decline continues.
 
</div>
</li>
<li class="level1"><div class="li">
Support Turns Resistance:
 After the trend line is broken, there is sometimes a retracement that 
tests the newfound resistance level. Potential support-turned-resistance levels can also be identified from the reaction lows within the bump.
</div>
</li>
</ol>

The Bump and Run Reversal pattern can be applied to daily, weekly or 
monthly charts. As stated above, the pattern is designed to identify 
speculative advances that are unsustainable for a long period. Because 
prices rise very fast to form the left side of the bump, the subsequent 
decline can be just as ferocious.  
 
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2qrRIt9uAWijbBNRAeJrkeLPoVeVqOGbHeHRDc3bDZSh6Y-A-UyxtwuE33Pf-QfotBCVusDHNSikQnif8C4pVY36IH-pPEPyIVC5eyJMCOJj3nH-td9KgoUT6zV8LXLDE0beI9wpRLaI/s1600/2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="401" data-original-width="517" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2qrRIt9uAWijbBNRAeJrkeLPoVeVqOGbHeHRDc3bDZSh6Y-A-UyxtwuE33Pf-QfotBCVusDHNSikQnif8C4pVY36IH-pPEPyIVC5eyJMCOJj3nH-td9KgoUT6zV8LXLDE0beI9wpRLaI/s1600/2.png" /></a></div>
Level Three Communications (LVLT) formed a Bump and Run Reversal pattern
 after prices advanced in a speculative frenzy at the beginning of 2000.
 Prices advanced from 72 to 132 in 2 months and this advance ultimately 
proved unsustainable.
 


 
<ul>
<li class="level1"><div class="li">
 The lead-in phase formed over a 3 
month period from early Oct-99 to early Jan-00. Volume during this phase
 was relatively subdued, and actually declined during the November and 
December advance.
 
</div>
</li>
<li class="level1"><div class="li">
 The trend line extending up from the
 lead-in phase lows formed a 34-degree angle. A visual assessment also 
reveals that this trend line is neither too steep nor too flat.
 
</div>
</li>
<li class="level1"><div class="li">
 The bump phase began in early 
January when the advance accelerated with a large increase in volume. A 
conservatively drawn trend line formed a 51-degree angle that was 
exactly 50% larger than the angle from the lead-in trend line.
 
</div>
</li>
<li class="level1"><div class="li">
 The distance from the lead-in 
phase's highest high to the trend line was 13. The distance from the 
bump phase's highest high to the trend line was 38. This is almost three
 times larger, and validates the speculative excesses in the bump.
 
</div>
</li>
<li class="level1"><div class="li">
 After reaching a high around 132, 
prices declined sharply, and bounced off the lead-in trend line. A lower
 high formed around 115 (red arrow), and the trend line was soon broken.
 
</div>
</li>
<li class="level1"><div class="li">
 The decline continued after the 
trend line break, and reached 67 before a reaction rally began. The 
reaction rally advanced to around 95, but fell just short of the 
horizontal support line before falling back to new lows.</div>
</li>
</ul>
 
 Note: Classified these chart patterns as to whether they are typically reversal or continuation patterns, but many can indicate either a reversal or a continuation, depending on the circumstances.
</div>

Common Reversal Chart Patterns Double Top Reversal (Bearish Reversal) Double Bottom Reversal (Bullish Reversal) Head and Sh...

40. Common Chart Pattern.

10:37 PM NBIG

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Chart Analysis – Common
Chart Patterns

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Introduction</div>

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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQMan_hO8CI4JFD0Z8oJYCxgUY6YyjPzDmGJ7oeKcE2VUjETylebjRia4kGauqmbHVFlOAUBSJuisjrWWoUhMKNE89A460p1QHb1a7Bb-ogWhlHi_XizZXsg369wS6Sd3LcRTlQyDI7XE/s1600/2013_04_01_tickertape_ChartMadeSimple_charts8.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="958" data-original-width="1200" height="159" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQMan_hO8CI4JFD0Z8oJYCxgUY6YyjPzDmGJ7oeKcE2VUjETylebjRia4kGauqmbHVFlOAUBSJuisjrWWoUhMKNE89A460p1QHb1a7Bb-ogWhlHi_XizZXsg369wS6Sd3LcRTlQyDI7XE/s200/2013_04_01_tickertape_ChartMadeSimple_charts8.jpg" width="200" /></a>There are hundreds of thousands of market
participants buying and selling securities for a wide variety of reasons: the hope of gain, fear of loss, tax consequences,
short-covering, hedging, stop-loss triggers, price target triggers, fundamental
analysis, technical analysis, broker recommendations and a few dozen more.
Trying to figure out why participants are buying and selling can be a daunting
process. Chart patterns put all buying and selling into perspective by
consolidating the forces of supply and demand into a concise picture. As a
complete pictorial record of all trading, chart patterns provide a framework to
analyze the battle raging between bulls and bears. More importantly, chart
patterns and technical analysis can help determine who is winning the battle,
allowing traders and investors to position themselves accordingly. </div>

<div style="text-align: justify;">
In many ways, chart patterns are simply more complex
versions of trend lines. It is important that you read and understand our
articles on Support and Resistance as well as Trend Lines before you continue.  
  </div>

<div style="text-align: justify;">
Chart pattern analysis can be used to make
short-term or long-term forecasts. The data can be intraday, daily, weekly or
monthly and the patterns can be as short as one day or as long as many years.
Gaps and outside reversals may form in one trading session while broadening tops and dormant bottoms may require many
months to form. </div>

<div style="text-align: justify;">
The science of chart reading, however, is not
as easy as the mere memorizing of certain patterns and pictures and recalling
what they generally forecast. Any general stock chart is a combination of
countless different patterns and its accurate analysis depends upon constant
study, long experience and knowledge of all the fine points, both technical and
fundamental, and, above all, the ability to weigh opposing indications against
each other, to appraise the entire picture in the light of its most minute and
composite details as well as in the recognition of any certain and memorized
formula.</div>

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Careful and constant studies are
required for successful chart analysis.</div>

<h3 style="text-align: justify;">
Continuation Patterns vs. Reversal Patterns</h3>

<div style="text-align: justify;">
Two basic tenets of technical analysis are that
prices trend and that history repeats itself. An uptrend indicates that
the forces of demand (bulls) are in control and a downtrend that the forces of
supply (bears) are in control. However, prices do not trend forever
and as the balance of power shifts, a chart pattern begins to emerge. Certain
patterns, such as a parallel channel, denote a strong trend. However, the vast
majority of chart patterns fall into two main groups: reversal and
continuation. Reversal patterns indicate a change of trend and can be broken
down into top and bottom formations. Continuation patterns indicate a pause in
trend and indicate that the previous direction will resume after a period of
time. </div>

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Just because a pattern forms
after a significant advance or decline does not mean it is a reversal pattern.
Many patterns, such as a rectangle, can be classified as either reversal or
continuation. Much depends on the previous price action, volume, and other
indicators as the pattern evolve. This is
where the science of technical analysis becomes the art of technical analysis.</div>

<h3 class="MsoNormal" style="text-align: left;">
Below is a
list of common chart patterns that can be useful in Technical Analysis.</h3>

<h3>
Reversal Patterns</h3>

<ul type="disc">
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Double Top Reversal (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Double Bottom Reversal (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Head and Shoulders Top (Bearish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Head and Shoulders Bottom (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Falling Wedge (Bullish Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Rising Wedge (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Rounding Bottom (Long Term Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Triple Top Reversal (Bearish Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Triple Bottom Reversal (Bullish
 Reversal)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l1 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Bump and Run Reversal (Bearish
 Reversal)</li>
</ul>

<h3>
Continuation Patterns</h3>

<ul type="disc">
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Flag, Pennant (Short-Term
 Continuation)</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Symmetrical Triangle</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Ascending Triangle</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Descending Triangle</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Rectangle</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Price Channel</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Measured Move - Bullish</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Measured Move - Bearish</li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;">Cup with Handle</li>
</ul>
 

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Chart Analysis Common Chart Patterns Continuation Patterns Reversal Patterns 40. Common Chart Pattern.

Chart Analysis – Common Chart Patterns Introduction There are hundreds of thousands of market participants buying and selling ...