Category Archives: Charts and Patterns

Double Bottom

Double Bottoms are reversal patterns and often seem to be one of the most common (together with double top patterns) patterns for currency trading. Double Bottoms patterns are identified by two consecutive low prices of the same depth with a moderate pull back up in between (neckline peak).

Cup With Handle

A cup-and-handle chart pattern resembles a cup of coffee. These are bullish continuation patterns where the growth has paused momentarily, it trades down and then continues its upward pattern. This pattern must always be at least 5 weeks long and can last up to a year. Click on this post to learn more.

Collar Option Strategy

The Collar Option Strategy is designed to limit the downside risk of a held underlying security. It can be performed by holding a long position in a security, while simultaneously going long a Put and shorting a Call. Read this article to read details of the strategy and to see a profit/loss example.

Candlesticks

A point on a candle stick chart representing a specific time period (a day, an hour, a minute, etc) in which the underlying stock price has moved. Candlesticks will have a body and usually two wicks – one on each end.

Falling Knife

Falling Knife is a phrase used for a stock where the price has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value where the shares become worthless. Trying to catch a “falling knife” right as it rebounds is dangerous!

Dead Cat Bounce

A trading term called a dead cat bounce is used to when a stock is in a severe decline and has a sharp bounce off the lows. It occurs due to the huge amount of short interest in the market. This bounce will be short lived and followed up by heavy selling which will break the prior price low.

Chart Patterns: Gaps

A gap in a chart is basically an empty space between one trading period and the one prior to that trading period. They normally form on account of an important and material event that will affect security, like an earnings surprise or a merger agreement. Read this article to learn more!

The Flag & Pennant Pattern

Flags and Pennants are categorized as a continuous pattern. They normally represent only brief pauses in a dynamic stock. They’re typically seen immediately after a quick move. The stock will then take off again in the same direction. Click on this post for more information about Flags and Pennants.

V Top

The V top is a reverse V-shaped top, where the top is quite sharp. It’s due to the irrationality of actors leading to a steep increase that will be corrected shortly afterwards. Read this article to learn more!

Horizontal Channel

A horizontal channel is a pattern that underlines investor’s indecisiveness. This horizontal channel is assembled by two horizontal and parallel lines that build the progress of the price. To confirm a line, there should be at least two points of contact with the price. The more contact points it will has, the more these will be durable and their breakout will give an substantial buy/sell signal.

Descending Triangle

The descending triangle is a bearish continuation pattern. This pattern forms two converging lines. The initial is a downward slant which resistance and the other is a horizontal support. To validate the descending triangle, there must be oscillation between the two lines. The lines must be touched at least twice for validation.

Cup and Saucer

The Cup and Saucer is a chart with a continuous pattern, formed by two rounded bottoms, the first is deeper and wider than the second. The height of the cup and the handle will be aligned along a straight horizontal resistance. This is the neckline of the pattern. Read this article to find out more!

Descending Flag

The descending flag shows as a continuation pattern. The flag is built by two straight downward parallel lines which is shaped like a rectangle. It is oriented in the direction of that trend which it consolidates. Contrary to a bearish channel, this pattern is quite short term and shows the fact that buyers will need a break. Click on this post to learn more!

Reverse Head and Shoulders

Reverse head and shoulders is a trend reversal pattern that marks a desire to make a bullish reversal. The theory is the same as a triple bottom other than the second bottom will be lower than the others, which are technically at the same height. Click on this post for more information.

Broadening Formations

The right-angled and ascending broadening chart pattern is not one you might choose to trade. Other chart patterns perform much better. Downward breakouts have a big break even failure rate which may disqualify them from your trading tools. Upward breakouts have only a middling average rise, and that is if you trade them perfectly.

Broadening Bottom

The broadening bottom is one of those chart patterns that appears often, but you might want to avoid trading. The performance rank approaches the bottom of the list with a comparatively high break even failure rank and low average rise in a bull market. Its only redeeming value is the partial decline which does an excellent job of predicting an upward breakout.