Chart Formations Cheat Sheet
Triangles
Ascending Triangle
Description: consolidation between a horizontal upper line and an ascending bottom trend line.
Signal: longer-term pattern. Occurs during an uptrend. Continuation pattern with a breakout higher.
Symmetrical Triangle
Description: series of peaks and troughs that can be connected by two trend lines, converging in the middle.
Signal: longer-term pattern. Can break up or down one half or 3/4 of the way through the formation.
Descending Triangle
Description: consolidation between a descending upper trend line and a horizontal bottom line.
Signal: longer-term pattern. Occurs during a downtrend. Continuation pattern with a breakdown lower.
Wedges
Falling Wedge
Description: consolidation with lower highs and lower lows (downward sloping) that converges towards a single point.
Signal: indicates the upcoming breakout higher, regardless of the price action before the pattern. The breakout is stronger if it occurs with a significant volume increase.
Rising Wedge
Description: consolidation with higher highs and higher lows (upward sloping) that converges towards a single point.
Signal: indicates the upcoming breakdown, regardless of the price action before the pattern. The breakout is stronger if it occurs with a significant volume increase.
Pennants
Bullish Pennant
Description: a large upward price movement (a flagpole), followed by a consolidation (usually symmetrical).
Signal: shorter-term continuation pattern with a breakout upwards. Accompanied by strong volume for the flagpole, lowering volumes during consolidation, and sharply increasing volume at the breakout.
Bearish Pennant
Description: a large downward price movement (a flagpole), followed by a consolidation (usually symmetrical).
Signal: shorter-term continuation pattern with a breakdown lower. Accompanied by strong volume for the flagpole, lowering volumes during consolidation, and sharply increasing volume at the breakdown.
Flags
Bullish Flag
Description: a large upward price movement (a flagpole), followed by a movement contained between parallel trend lines that slope down.
Signal: shorter-term continuation pattern with a breakout upwards. Accompanied by strong volume for the flagpole, lowering volumes during the flag body formation, and sharply increasing volume at the breakout.
Bearish Flag
Description: a large downward price movement (a flagpole), followed by a movement contained between parallel trend lines that slope up.
Signal: shorter-term continuation pattern with a breakdown lower. Accompanied by strong volume for the flagpole, lowering volumes during the flag body formation, and sharply increasing volume at the breakdown.
Reactangles
Bullish Rectangle
Description: a price movement contained between two parallel horizontal lines forming support and resistance. Occurs in an uptrend.
Signal: longer-term pattern. Usually a continuation pattern, forming a pause in a trend before it continues upward. Note: the actual direction of the move can only be determined based on the breakout itself.
Bearish Rectangle
Description: a price movement contained between two parallel horizontal lines forming support and resistance. Occurs in a downtrend.
Signal: longer-term pattern. Usually a continuation pattern, forming a pause in a trend before it continues downward. Note: the actual direction of the move can only be determined based on the breakout itself.
Valleys and Peaks
Three Rising Valleys
Description: three consecutive, similar-looking, “valleys”, where each next low is higher than the previous one. The pattern is confirmed when the price closes above the pattern's highest high (second peak).
Signal: suggests the price movement further to the upside.
Three Falling Peaks
Description: three consecutive, similar-looking, “peaks”, where each next high is lower than the previous one. The pattern is confirmed when the price closes below the pattern's lowest low (second valley).
Signal: suggests the price movement further to the downside.
Diamonds
Diamond Bottom
Description: a broadening price movement followed by a narrowing price movement, together forming a diamond shape, usually tilted. Occurs after a downtrend.
Signal: longer-term formation. Indicates a likely reversal upwards.
Diamond Top
Description: a broadening price movement followed by a narrowing price movement, together forming a diamond shape, usually tilted. Occurs after an uptrend.
Signal: longer-term formation. Indicates a likely reversal downwards.
Cup and Handle
Cup and Handle
Description: a formation, consisting of a u-shape cup and a handle - a short trading range with slight downward slope. The volumes are decreasing in handle part of the pattern.
Signal: longer-term formation. Signal a potential upward breakout (accompanied by strong volume).
Inverted Cup and Handle
Description: a formation looking like a flipped over u-shape cup with a handle - a short trading range with an upward slope. The volumes are decreasing in handle part of the pattern.
Signal: longer-term continuation formation. Signals a potential break to the downside (accompanied by strong volume).
Head and Shoulders
Inverted Head and Shoulders
Description: three valleys, where the middle valley is the deepest (head) and the side ones share the similar height (shoulders). The line connecting the highest points of the valleys represents the neckline.
Signal: works on all time frames. Signals the reversal of bearish trend to bearish.
Head and Shoulders
Description: a baseline (neckline) with three peaks, where the middle peak is the highest (head) and the side ones share the similar height (shoulders). The neckline can have an upward or a downward tilt.
Signal: works on all time frames. Signals the reversal of bullish trend to bearish.
Tops and Bottoms
Double Bottom
Description: a W-shaped figure, formed with two valleys of the approximately same depth. The formation occurs after an extended downtrend.
Signal: typically a longer-term formation. Indicates the reversal of the downtrend to the uptrend. The expected price advance is close to the height of the formation itself.
Double Top
Description: an M-shaped figure, formed with two peaks of the approximately same height. The formation occurs after an extended uptrend.
Signal: evolves over a longer period of time and indicates the reversal of the uptrend downwards. The expected price decline is close to the height of the formation itself.
Triple Bottom
Description: occurs after a downtrend in form of three consecutive equal lows. The neckline is the highs of two rebounds and represents the resistance level. Breaking of the neckline upward activates the formation.
Signal: quite a rare formation, which makes it a strong reversal signal. Indicates a reversal upwards.
Triple Top
Description: occurs after an uptrend in form of three consecutive equal peaks. The lows of two rebounds form the neckline, which becomes a support level. Breaking of this support downwards activates the formation.
Signal: forms rarely and indicates that the downward reversal is around the corner.
