Chart Patterns

Continuation Patterns	Reversal Patterns
Cup and Handle	Double Bottom/Top
Flag	Head and Shoulders Bottom/Top
Pennant	Rounded Bottom/Top
Rectangle	Triple Bottom/Top
Triangle Ascending/Descending	Wedge Falling/Rising
Triangle Symmetrical
Wedge Rising/Falling

Continuation Patterns

Cup and Handle

Gets its name from its look.  The first pullback well be about 30-50% of the prior move with a second try that consolidates before breaking through.

Breakout Expectation - The height of the cup added to the breakout point.

Flag

Usually found in the middle of a trend were the currency takes a breather before continuing.  The breather forms between to parallel support and resistance points.  The pattern resembles a flag on a pole.

Breakout Expectation - The height of the flagpole added to the breakout.

Pennant

Has some of the same characteristics as the flag but the consolidation narrows into a symmetrical triangle shape before breaking out.

Breakout Expectation - The height of the flagpole added to the breakout.

Rectangle

Usually one of the easier patterns to recognize with well defined support and resistance levels that offer a brief period of consolidation.  Many times the breakout will continue in the direction of the original trend.  

Breakout Expectation - The height of the channel added to the breakout point.

Triangle Ascending/Descending

Represents a narrowing triangle with a solid horizontal line forming on one side of the triangle.  Breakout usually is in the direction of the original trend.

Breakout Expectation - The height of the widest part of triangle added to the breakout point.

Triangle Symmetrical

Similar to pennant but without the flag pole.  Usually represents an area of consolidation and/or indecision.  A majority of the time the breakout will be in the direction of the original trend. 

Breakout Expectation - The height of the widest part of triangle added to the breakout point.

Wedge Falling/Rising

Prices narrow towards converging trend lines.  Wedge patterns tend to break opposite the direction of the wedge.  Thus, a falling wedge will tend to break up and a rising wedge will tend to break down.  

A wedge can form a continuation or reversal pattern depending on how the trend enters the wedge.  Compare images at right to those under the "reversal patterns" section.  

Breakout Expectation - Widest portion of wedge added to the breakout point.

Reversal Patterns

Double Bottom/Top

Usually occurs after an extended trend were a second attempt at breaching a low/high fails forming a double bottom (lows) or top (highs).  The double bottom or top does not necessarily have to be equal in price but should have a reaction high/low in between the two prices.

Breakout Expectation -Difference between the first low/high point and the reaction high/low added to the breakout of a double bottom or subtracted from the breakout of a double top. 

Head and Shoulders Bottom/Top

To be most reliable the shoulders should be fairly symmetrical and form over about the same amount of time.  The shoulders do not necessarily have to be at the same price level but should fall short of the head.

Breakout Expectation - Difference between the head and the neckline.

Rounded Bottom/Top

Not as common but easy to recognize if they stay within the confines of the semi-circle pattern.   They tend to form near the end of a trend. 

Triple Bottom/Top

Same as double bottom and double top except that there are three tops or bottoms. The formation is not complete until the breakout has occurred.

Breakout Expectation - Same as for double bottom and double top. 

Wedge Falling/Rising

Prices narrow towards converging trend lines.  Wedge patterns tend to break opposite the direction of the wedge.  Thus, a falling wedge will tend to break up and a rising wedge will tend to break down.  

A wedge can form a continuation or reversal pattern depending on how the trend enters the wedge.  Compare images at right to those under the "continuation patterns" section.  

Breakout Expectation - Widest portion of wedge added to the breakout point.

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