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Day 6: Chart Patterns pt1
🟦 1. Double Top
📉 Trend reversal pattern (bullish to bearish)
How it works:
• The price rises and touches a resistance area twice.
• It fails to break that resistance.
• Between the two tops, there is a pullback (the “V” in the middle).
- When the price breaks the lower support line, the drop is confirmed.
What it indicates:
➡️ Sell signal (possible strong drop).
➡️ Buyers lose, a bearish trend begins.
🟦 2. Double Bottom
📈 Trend reversal pattern (bearish to bullish)
How it works:
• The price falls and touches a support area twice.
• It fails to break that support.
• Between the two bottoms, there is a bounce (the Ʌ in the middle).
- When the price breaks the upper resistance line, the rise is confirmed.
What it indicates:
➡️ Buy signal (possible strong rise).
➡️ Sellers lose, a bullish trend begins.
🟦 3. Triangles
📈📉 Continuation or breakout pattern (both are possible)
- There are several types: ascending, descending, and symmetrical, but the logic is similar.
How it works:
• The price compresses between two lines:
• One line that goes down or up.
• The other that makes the opposite movement or remains stable.
- A triangle forms because the highs and lows are getting closer.
What it indicates:
➡️ It often anticipates a strong movement.
➡️ Mostly, it is a continuation pattern, but it can break in either direction.
🟦 4. H&S (Head and Shoulders)
📉 Very strong trend reversal pattern (bullish → bearish)
How it works, three peaks form:
• Left shoulder: a high.
• Head: a higher high.
• Right shoulder: a lower high.
- There is a neckline (blue line) that connects the lows.
- When the price breaks that line → the drop is confirmed.
What it indicates:
➡️ Reliable signal of a strong bearish trend.
➡️ It is one of the most professionally used patterns.