Analysis of charts to look for certain chart patterns, such as head and shoulders, triangles, and flags, which can provide clues about a security’s future price movements.
What are some of the most popular technical analysis chart patterns?
There are many different chart patterns that technical analysts look for, but some of the most popular ones include:
- Head and shoulders: This pattern is characterized by a peak (the “head”) followed by a higher peak (the “left shoulder”), and then another lower peak (the “right shoulder”). It is considered a bearish reversal pattern.
- Double top: This pattern looks like two peaks that are roughly equal in height, with a trough in between them. It is considered a bearish reversal pattern.
- Double bottom: This pattern looks like two troughs that are roughly equal in depth, with a peak in between them. It is considered a bullish reversal pattern.
- Flags and triangles: These patterns are characterized by a period of consolidation following an uptrend or downtrend. A flag looks like a rectangle, while triangle patterns come in various forms such as descending and symmetrical. Both are considered continuation patterns.
- Trend lines: Trend lines are lines drawn on a chart that connect a series of highs or lows. They can be used to show the direction of a trend and identify potential areas of support and resistance.
These are just a few examples of the many different chart patterns that technical analysts may look for. It’s important to note that there is no guarantee that these patterns will continue to behave in the same way in the future as they have in the past.