Charts

Price patterns project the future path of stocks. The patterns do so by observing the past price action of a stock and projecting the collective intentions of buyers and sellers into the future.

Price patterns appear across all actively traded markets such as stocks, bonds, and commodities, and currencies (forex).

There are two different types of price patterns: continuation and reversal. The galleries below display examples of both categories in terms of bullish and bearish price patterns.

  • Bullish Continuation Patterns (8)

    Bullish price continuation patterns tend to form within the context of bullish trends. Bullish continuation patterns typically portend the continuation of existing bullish trends.

    Bullish continuation patterns are the most important price patterns for two reasons. First, individual stocks and the stock market as a whole tend to trend higher. Second, stocks can go 100, 200, or even 10,000 percent higher, but can only go down by 100 percent. The power of exponential growth in stocks is best applied with bullish continuation patterns.
     

  • Bearish Continuation Patterns (5)

    Bearish continuation patterns tend to form within the context of bearish trends. Bearish continuation patterns typically portend the continuation of the existing bearish trends.

    Bearish continuation patterns are best to apply in bearish markets, industries, or individual stocks. It sounds simple enough, but too many traders ignore this axiom. Don’t go looking for bearish continuation patterns in bullish markets or sectors.
     

  • Bullish Reversal Patterns (6)

    Bullish reversal patterns tend to form at the ends of existing bearish trends. Bullish reversal patterns, when complete, conclude existing bearish trends and portend the beginning of new bullish trends.

    It’s incredibly important to carefully measure and manage your risk when trading bullish reversal patterns. Keep in mind that the formation of a bullish reversal pattern doesn’t guarantee a new bullish trend. The probabilities of bullish reversal patterns playing out as expected are less than the probabilities associated with trading bullish continuation patterns.
     

  • Bearish Reversal Patterns (7)

    Bearish reversal patterns tend to form at the ends of existing bullish trends. Bearish reversal patterns, when complete, conclude existing bullish trends and portend the beginning of new bearish trends.

    Bearish reversal patterns predict the reversal of an existing bullish trend and the beginning of a new bearish trend. Like bullish reversal patterns, bearish reversal patterns go against the grain of an existing trend. This makes bearish reversal patterns a bit more difficult in their application. Furthermore, bearish reversal patterns go against the long-term upward trend in stock prices.
     
 

The current sentiment of the market and the balance between buyers and sellers is all revealed by price patterns. Sometimes there is no existence of price patterns across stocks. Other times price patterns appear across what seems like all stocks.

Price patterns occur and are applicable in all timeframes, from intraday to yearly timeframes. The beauty of price patterns is that they are recurring. Best of all, there are only a handful of patterns to learn.

In addition to forecasting the direction of a stock, price patterns provide context to your trading. The price patterns offer targets, both in time and price. These objectives are extremely useful in weighing the risk against the potential reward, and for setting time horizons.

Study the appearance of each pattern in these galleries. The sooner you can identify a particular price pattern the sooner it can be applied to actual trading.