42 Chart Patterns for Effective Intraday, Swing & F&O Trading

As you can see, the price of Bitcoin formed a sharp descent as bears took control. As the price declined, bulls started to come in, which led to a small triangle pattern. In most cases, a bearish flag pattern will likely breakout lower while a bullish flag will often break out higher. The chart below shows an example of a bearish flag pattern on the USD/GBP pair. On the other hand, the term pennant refers to a flag or banner that is longer than the hoist.

1. Another tactic is waiting for a pullback or throwback to resistance before buying.
2. This triangle usually happens when bulls and bears battle about the movement of an asset.
3. For example, a 30-minute timeframe price charts means a descending triangle will take a minimum of 30 hours (30 minutes x 60) to form.
4. However, overall sentiment remains bearish, and most traders anticipate lower prices after this brief consolidation.
5. A symmetrical triangle, on the other hand, does not have a defined outlook.
6. Post-spike, the expectation is for the market to continue its prior direction.

The formation of an ascending triangle pattern on the chart warns traders of an imminent upward impulse breakout. The area of resistance forms the upper, horizontal line of an ascending triangle pattern. For the pattern to form, this resistance area should be tested several times. The more times that the resistance area is tested and not broken through, the stronger the eventual breakout may be. The second example shows a ascending triangle pattern, with three consecutive highs at a constant level and three consecutive lows increasing each time. The breakout occurs bullishly and the extent of the following uptrend is predicted almost exactly by the height of the base of the ascending triangle.

Are Descending Triangles Used In Technical Analysis or Fundamental Analysis?

Momentum indicators like the RSI and MACD are supportive of further upside. The risk-reward is attractive for new entries at current levels with a stop below Rs 240. However, proper position sizing and sound risk management are essential.

As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!). A symmetrical triangle is a chart formation where the slope of the price’s highs and the slope of the price’s lows converge together to a point where it looks like a triangle. Flag patterns and wedge patterns are both important continuation patterns in technical analysis, but they have distinct differences in structure and implications.

This forms a wedge shape that narrows as the trend lines move closer together. The upper and lower trendlines converge at a roughly similar angle, indicating the balanced force of buyers and sellers. The pattern is complete when the price breaks out above the upper trendline resistance or below the lower trendline support. The direction of the ensuing move depends on the direction of the preceding trend.

Since we already know that the price is going to break out, we can just hitch a ride in whatever direction the market moves. We don’t know what direction the breakout will be, but we do know that the market will most likely break out. Both types are prevalent and widely used by traders to identify continuation opportunities.

A long entry was generated in this example based on elliot wave priniciple. This is how a long trade setup is generated based on Elliot waves principle, candlestick pattern and price action. V bottom is found typically at the bottom of the chart and a V type price movement is seen. Traders find a high probability of a long setup at the retest of this neckline. Traders find the range of the V to be an appropriate target price after the trade entry. The pipe bottom is a bullish reversal pattern that signals a potential trend change from bearish to bullish.

1. Ascending triangle patterns are bullish, meaning that they indicate that a security’s price is likely to climb higher as the pattern completes itself.
2. The Quasimodo pattern starts with a tall upper shadow candlestick that forms the head, this is then followed by a second candlestick with a short upper shadow and a small real body that forms the hump.
3. Reversal patterns are often not followed by trend reversals, and continuation patterns are often followed by breakouts up or down.
4. Breakouts from the double bottom/top triangles guide forex traders in making trend continuation or reversal decisions.
5. The price fluctuates within a range, reflecting a temporary uncertainty in the market.
6. The range of this setup becomes the target whenever the price gives an opportunity for a trade setup.

Traders use stop losses to protect against price fakeouts, false signals, and trading capital preservation. Descending triangle pattern drawing involves firstly plotting a downward sloping resistance trendline on the price chart from left to right that connects the lower swing high prices together. Mark the the pattern’s first swing high point and connect this point directly to the lower swing high points with a trendline. When you detect increasing lows in the price chart and at least two highs at approximately the same level, it is necessary to draw lines connecting them at one point. Thus, you can draw a triangle with a rising lower line and a horizontal upper line.

A false triangle flag pattern breakout occurs when the price breaks out of a pattern but fails to continue in the expected direction. Traders reduce whipsaws from false breakouts by requiring additional confirmation beyond the initial break. The chart also marks a “take profit range” at the upper end of this projected move.

What Is Technical Analysis?

The first two price swings are only used to actually draw the triangle. Therefore, to establish the potential support and resistance levels, and take a trade at one of them, the price must touch the level at least three times. If the price breaks above triangle resistance (upper trendline), then a long trade is initiated with a stop-loss order placed below a recent swing low, or just below triangle support (lower trendline). Another profitable strategy to trade ascending triangles is to set a perpendicular line and build a symmetrical triangle. In the ascending triangle, the price breaks the horizontal line upwards, while in the rising wedge, there is an impulse breakout of the upper line downside. The most common flag pattern can vary depending on market conditions, but bullish flag patterns are often observed in strong uptrends, while bearish flag patterns are frequently seen in strong downtrends.

Triple Top Pattern in Forex Trading: Identification and Interpretation Guide

Therefore, the execution of the breakout strategy is the same in all the triangles. Therefore, the swing highs of the triangle pattern appear as a horizontal line, while an ascending trending line forms the rising swing lows. Imagine a flag fluttering in the wind – the Bullish Pole & Flag Pattern mirrors this imagery in the financial markets.

Pennant Patterns vs. Symmetrical Triangles

After the ‘hump’ candlestick, there is usually a gap down and a long black candlestick that indicates the reversal. Reversal patterns include classics like head and shoulders, inverse head and shoulders, double top, double bottom, triple top, triple bottom, rounding top, and rounding bottom. Continuation patterns feature flags, pennants, wedges, various types of triangles, and rectangles. Candlestick patterns form another significant category, including doji, hammer, hanging man, engulfing patterns, harami, morning star, evening star, three white soldiers, and three black crows. These patterns often provide insights into short-term price movements and sentiment shifts.

It starts after a long bullish trend when the price rises to the peak and pulls back. Shortly after, the price rises again to a significantly higher peak but declines again. Finally, the price goes up for the third time but only reaches a level of the first high.

In the event that an ascending triangle pattern forms during an overall downtrend in the market, it is typically seen as a possible indication of an impending market reversal to the upside. Ascending triangle patterns are bullish, meaning that they indicate that a security’s price is likely to climb higher as the pattern completes itself. The first trendline is flat along the top of the triangle and acts as a resistance point which—after price successfully breaks above it—signals the resumption or beginning of an uptrend. The second trendline—the bottom line of the triangle that shows price support—is a line of ascension formed by a series of higher lows. It is this configuration formed by higher lows that forms the triangle and gives it a bullish characterization.