Big Book

of
Chart Patterns

Trading Tips

This book is
gifted to book-lovers by
R¿ddler & Cadzbuddy
Contents

Introduction

CHART PATTERNS

1. Broadening Bottoms
2. Broadening Tops
3. Bump-and-Run Reversal Bottoms
4. Bump-and-Run Reversal Tops
5. Cup and Handle
6. Cup and Handle (Inverted)
7. Diamond Bottoms
8. Diamond Tops
9. Double Bottom (Adam & Adam)
10. Double Bottom (Adam & Eve)
11. Double Bottom (Eve & Eve)
12. Double Tops (Adam & Adam)
13. Double Tops (Adam & Eve)
14. Double Tops (Eve & Eve)
15. Flags (Bullish)
16. Flags (Bearish)
17. Flags (High & Tight)
18. Gaps (Area)
19. Gaps (Breakaway)
20. Gaps (Continuation)
21. Gaps (Exhaustion)
22. Head & Shoulders (Inverted)
23. Head & Shoulders (Inverted Complex)
24. Head & Shoulders (Inverted Continuation)
25. Head & Shoulders
26. Head & Shoulders (Complex)
27. Horn Bottoms
28. Horn Tops
29. Island Reversals
30. Pennants (Bullish)
31. Pennants (Bearish)
32. Pipe Bottoms
33. Pipe Tops
34. Rectangle Bottoms
35. Rectangle Tops
36. Rounding Bottoms
37. Rounding Tops
38. Scallops (Ascending)
39. Scallops (Inverted Ascending)
40. Scallops (Descending)
41. Scallops (Inverted Descending)
42. Three Falling Peaks
43. Three Rising Valleys
44. Triangles (Ascending)
45. Triangles (Descending)
46. Triangles (Symmetrical)
47. Triple Bottoms
48. Triple Tops
49. Wedges (Falling)
50. Wedges (Rising)
 Introduction

The origins of chart patterns can be found in the work of

Charles Dow in a series of articles published in his editorials for
The Wall Street Journal from 1900-1902. His views were later
developed into what is now known as “Dow Theory.” Dow’s
observations of price trends and his understanding or trend
based on the progression of peaks and troughs form the
foundation for modern-day technical analysis.

The observations that Dow made, and the methodologies found

in technical analysis are fractal in nature. This means that the
techniques used can be applied to any aggregation period
whether its intraday, daily, weekly or monthly.

As you study charts and look to identify patterns, you’ll want to

spend time to identify the successive peaks and troughs or
highs and lows. Also, as part of your pattern recognition it is
important to be able to identify the previous trend based on the
aggregation period being used. The combination of the previous
trend and the current highs and lows will form the foundation
for proper chart pattern recognition.

This resource is intended to introduce you to 50 di erent price

patterns. With every price pattern there is a setup, a trigger and
a projected move. For each pattern, there is a description of
whether the pattern is bullish, bearish or non-directional.
Whether it’s a signal of a continuation of the trend, a reversal of
the trend, or is non-directional. Also, there is a description of
how volume develops during the formation of the pattern, and
how to establish a price projection based on the measuring
technique for each pattern.

Statistical references in this book is taken from the

Encyclopedia of Chart Patterns by Thomas Bulkowski. His work
represents the most comprehensive study of the e ectiveness of
chart patterns to date.
CHART PATTERNS
1
Broadening Bottoms
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern forms at the tail end

of a downtrend. The pattern takes on the appearance of a
megaphone as the price forms a series of higher highs
and lower lows throughout the formation. The pattern
needs at least two highs and lows to be a valid formation.

Volume Description: The volume should diminish

through the pattern up until the breakout

Breakout Confirmation: A close above the upper trend-

line on above average volume.

Measuring Technique: Measure from the highest high to

the lowest low before the breakout, and add that amount
to the highest high for the price target.

Amount to the highest high for the price target.

Year lows tend to perform better.

2
Broadening Tops
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern forms at the tail end

of an uptrend. The pattern takes on the appearance of a
megaphone as the price forms a series of higher highs
and lower lows throughout the formation. The pattern
needs at least two highs and lows to be a valid formation.

Volume Description: The volume should diminish

through the pattern up until the breakout

Breakout Confirmation: A close below the lower trend-

line on above average volume.

Measuring Technique: Measure from the highest high to

the lowest low before the breakout and subtract that
amount from the lowest low for the price target.

That amount from the lowest low for the price

target.

Year highs tend to perform better.

3
Bump-and-Run Reversal Bottoms
Directional Bias: Bullish

Pattern Type: Non-Directional

Pattern Description: This pattern is comprised of three

phases and looks similar to a frying pan. There is the
lead-in phase, the bump phase and the uphill run. The
lead-in phase is the handle of the frying pan before a
larger decline. Following the decline, the bump phase
forms as the price forms a at or rounded bottom. The
uphill run phase is after the breakout. For this type of
formation to be analyzed an arithmetic chart will need to
be used.

Volume Description: Volume is typically high at the

beginning of each phase and decreases throughout each
phase.

Breakout Confirmation: A close above the upper trend-

line drawn across the highs, during the lead-in phase,
with above average volume.

Measuring Technique: The price target is the highest

point of the lead-in phase.

Statistical Notes: Wider formations tend to perform

better than narrower formations, and a throwback
4
Bump-and-Run Reversal Tops
Directional Bias: Bearish

Pattern Type: Non-Directional

Pattern Description: This pattern is comprised of three

phases and looks similar to a mountain range. There is
the lead-in phase, the bump phase and the downhill run.
The lead-in phase is like a small range of foothills before
the larger mountains. Following an advance, the bump
phase forms as the price forms a at or rounded top. The
downhill run phase is after the breakout. For this type of
formation to be analyzed an arithmetic chart will need to
be used.

Volume Description: Volume is typically high at the

beginning of each phase and decreases throughout each
phase.

Breakout Confirmation: A close below the lower trend-

line drawn across the lows, during the lead-in phase,
with above average volume.

Measuring Technique: The price target is the lowest

point of the lead-in phase.

Statistical Notes: Wider formations tend to perform

better than narrower formations, and a pullback
5
Cup and Handle
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the

context of a longer uptrend and is characterized by the
price forming a u-shaped cup with a short handle on the
right. The duration of the cup should last at least 7 weeks
if using a daily chart.

Volume Description: Volume will typically follow the

shape of the cup, with high volume as the left lip forms,
falling volume as the bottom of the cup forms and rising
volume toward the right lip and on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn across the handle with above average volume.

Measuring Technique: The price target is obtained by

measuring the right lip to the bottom of the cup and then
added to the price level of the right lip.

Statistical Notes: The pattern has a low failure rate but

doesn’t move as strongly as other patterns. Patterns with
shorter handles perform better than longer handles, and
deeper cups with the left lip slightly higher than the
right lip perform better.
6
Cup and Handle (Inverted)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the

context of a longer downtrend and is characterized by
the price forming an inverted u-shaped cup with a short
handle on the right. The duration of the cup should last
at least 7 weeks if using a daily chart.

Volume Description: Volume will typically follow the

opposite of the shape of the cup, with high volume as the
left lip forms, falling volume as the rounded top of the
cup forms and rising volume toward the right lip and on
the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn across the handle with above average volume.

Measuring Technique: The price target is obtained by

measuring the right lip to the top of the cup and then
subtracted from the price level of the right lip.

Statistical Notes: The pattern has a low failure rate but

doesn’t move as strongly as other patterns. Patterns with
shorter handles perform better than longer handles, and
deeper cups with the left lip slightly lower than the right
lip perform better.
7
Diamond Bottoms
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer downtrend. Initially the pattern
begins a broadening formation with higher highs and
lower lows, but then begins to narrow with lower highs
and higher lows.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn across the downward-sloping highs with
above average volume.

Measuring Technique: Measure the widest point of the

diamond’s range and add it to the breakout level.

Statistical Notes: Breakouts nears the 1-year low

typically outperform, and throwbacks following the
breakout generally hurt performance. The pattern has a
low failure rate with decent upside potential but tend to
fall-back once the target high is reached. Formations
with more range between highs and lows perform better
than shorter ranges.
9
Double Bottom (Adam 8 Adam)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer uptrend. Initially the pattern begins a
broadening formation with higher highs and lower lows,
but then begins to narrow with lower highs and higher
lows.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn across the upward-sloping highs with above
average volume.

Measuring Technique: Measure the widest point of the

diamond’s range and subtract it from the breakout level.

Statistical Notes: Breakouts near the 1-year high

typically outperform, and pullbacks following the
breakout generally hurt performance. The pattern has a
low failure rate with decent upside potential but tend to
fallback once the target high is reached. Formations with
more range between highs and lows perform better than
shorter ranges.
9
Double Bottom (Adam & Adam)
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer downtrend. The pattern forms two
equal lows with each low forming a v-shaped bottom
with a single day’s candle touching the low.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn horizontally across the intervening high
between the lows with above average volume.

Measuring Technique: Measure the distance between

the high and the two lows and add it to the breakout
level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
10
Double Bottom (Adam & Eve)
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer downtrend. The pattern forms two
equal lows with one low forming a v-shaped bottom
with a single day’s candle touching the low and the other
forming a wider bottom.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn horizontally across the intervening high
between the lows with above average volume.

Measuring Technique: Measure the distance between

the high and the two lows, and add it to the breakout
level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
11
Double Bottom (Adam & Eve)
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer downtrend. The pattern forms two
equal lows with each low forming a wider, rounded
bottom.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn horizontally across the intervening high
between the lows with above average volume.

Measuring Technique: Measure the distance between

the high and the two lows and add it to the breakout
level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
12
Double Tops (Adam & Adam)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer uptrend. The pattern forms two equal
highs with each high forming a v-shaped top with a
single day’s candle touching the high.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn horizontally across the intervening low
between the highs with above average volume.

Measuring Technique: Measure the distance between

the low and the two highs and subtract it from the
breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
13
Double Tops (Adam & Eve)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer uptrend. The pattern forms two equal
highs with one high forming a v-shaped top with a single
day’s candle touching the high and the other forming a
wider, more rounded top.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn horizontally across the intervening low
between the highs with above average volume.

Measuring Technique: Measure the distance between

the low and the two highs, and subtract it from the
breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
14
Double Tops (Eve & Eve)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer uptrend. The pattern forms two equal
highs with each high forming a wider, more rounded top.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn horizontally across the intervening low
between the highs with above average volume.

Measuring Technique: Measure the distance between

the low and the two highs, and subtract it from the
breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
15
Flags (Bullish)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the

context of a longer uptrend and following a steep, quick
upward move. Following the move, the pattern then
forms a short horizontal or downward sloping channel
shaped like a ag. The ag portion of the pattern
shouldn’t last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn across the highs with above average volume.

Measuring Technique: Measure the length of the

previous steep move leading into the ag, and then add
that amount to the breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges. Flag
formations that breakout in the direction of the
prevailing market trend tend to perform better, and ags
without gaps tend to perform better.
16
Flags (Bearish)
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the

context of a longer downtrend and following a steep,
quick downward move. Following the move, the pattern
then forms a short horizontal or upward sloping channel
shaped like a ag. The ag portion of the pattern
shouldn’t last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn across the lows with above average volume.

Measuring Technique: Measure the length of the

previous steep move leading into the ag, and then
subtract that amount from the breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges. Flag
formations that breakout in the direction of the
prevailing market trend tend to perform better, and ags
without gaps tend to perform better. Bull ags typically
perform better than bear ags.
17
Flags (High & Tight)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern is represented by a

narrow consolidation range that may last from several
days to several weeks following a doubling in the stock
price.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn across the highs with above average volume.

Measuring Technique: Measure the length of the

previous trend from low to high leading into the ag, and
then add one-half that amount to the breakout level.

Statistical Notes: Formations with less range between

highs and lows perform better than wider ranges.
Throwbacks hurt performance.
18
Gaps (Area)
Directional Bias: Non-Directional

Pattern Type: Reversal

Pattern Description: Area gaps are common gaps that

occur within or just following a consolidation. An area
gap is identi ed by the hook in the price that typically
occurs within a week to ll the gap.

Volume Description: Volume tends to be high on the gap

day but levels o quickly.

Breakout Confirmation: A close above or below the high

or low of the gap day in the opposite direction of the gap.

Measuring Technique: The expectations for movement

is the price closing the gap and the price returning to the
pre-gap level.

Statistical Notes: Bearish and bullish area gaps typically

ll within a week nearly 90% of the time regardless of
the prevailing market direction.
19
Gaps (Breakaway)
Directional Bias: Non-Directional

Pattern Type: Continuation

Pattern Description: Breakaway gaps can be bullish or

bearish and typically occur at the outset of a new trend
following a consolidation phase. Following the gap, the
price continues to rising to form higher highs and lows.

Volume Description: Volume tends to be signi cantly

higher on the gap day versus the previous day and
continues to be elevated for several days.

Breakout Confirmation:A breakout from a

consolidation and a continuation in the price movement
in the direction of the gap following the gap day.

Measuring Technique: The expectations for movement

is based on the price making a move that is two times the
size of move to the high gap day.

Breakaway gaps tend to not close the gap quickly,

often times taking six months or longer. Larger gaps
tend to perform better than smaller gaps, and gaps
that occur near a 12-month high or low perform
better.
20.
Gaps (Continuation)
Directional Bias: Non-Directional

Pattern Type: Continuation

Pattern Description: Continuation gaps can be either

bullish or bearish and typically occur near the middle of
the preceding trend. The gap itself is a rather sharp rise
in the price. These gaps are less common and will
typically remain open following a gap to a new high or
low in the direction of the preceding trend

Volume Description: Volume tends to be high on the gap

day, but not unusually high.

Breakout Confirmation: A gap in price to a new high or

low on higher volume in the middle of a trend. The price
subsequently holds the gap level.

Measuring Technique: Since the move occurs in the

middle of the trend, the projection would be the prior
move to the middle of the gap and then added or
subtracted from that middle value.

Statistical Notes: The bearish gap size in bear markets

tends to be larger than bullish gaps in bullish markets.
21.
Gaps (Exhaustion)
Directional Bias: Non-Directional

Pattern Type: Reversal

Pattern Description: Exhaustion gaps are gaps that

occur later in the trend— which tend to be larger in size
and pause for a couple days following the gap before
forming a new high or low.

Volume Description: Most exhaustion gaps occur on

high volume, and represent the last “gasp” before the
trend ends.

Breakout Confirmation: A large gap on high volume

that occurs following a continuation gap near the end of
the trend. The price fails to form a new high or low
following the gap and then closes below the low of the
gap day.

Measuring Technique: The target price is the high or

low of the day prior to the gap.

Statistical Notes: Within one week nearly two-thirds of

exhaustion gaps close, and within two weeks over 90%
of gaps close.
22.
Head & Shoulders (Inverted)
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the bottom

of a downtrend and is identi ed by three-valley
formation with the center valley, or low, forming a lower
low than the other two. The neckline is a trend-line that
is drawn across the intervening highs and should be
horizontal or downward sloping to the breakout area.
There should be a degree of symmetry between the
formation of the two shoulders and the head.

Volume Description: Volume tends to be high leading

into the down move of the rst shoulder, diminishes as
the price rises completing the left shoulder, is balanced
during the formation of the head, and expands as the
price breaks above the neckline.

Breakout Confirmation: A close above the neckline with

above average volume.

Measuring Technique: Measure the distance between

the rst high to the low of the head, and then add that
amount to the neckline on the breakout.
23.
Head & Shoulders (Inverted
Complex)
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the bottom

of a downtrend and is identi ed by a multiple shoulders
and/or head formation. The neckline is a trend-line that
is drawn across the intervening highs and should be
horizontal or downward sloping to the breakout area.
There should be a degree of symmetry between the
formation of the shoulders and head(s).

Volume Description: Volume tends to be higher on the

left shoulders during the down-moves, balanced toward
the head(s) and expanding on the breakout of the
neckline.

Breakout Confirmation: A close above the neckline with

above average volume.

Measuring Technique: Measure the distance between

the rst high to the low of the head, and then add that
amount to the neckline on the breakout.

Statistical Notes: Gaps on the breakout day tend to help

performance along with down-sloping necklines.
24.
Head & Shoulders (Inverted
Continuation)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs in the middle

of an uptrend and is identi ed by three-valley formation
with the center valley, or low, forming a lower low than
the other two. The neckline is a trend-line that is drawn
across the intervening highs and should be horizontal or
downward sloping to the breakout area. There should be
a degree of symmetry between the formation of the two
shoulders and the head.

Volume Description: Volume tends to be high leading

into the down move of the rst shoulder, diminishes as
the price rises completing the left shoulder, is balanced
during the formation of the head, and expands as the
price breaks above the neckline.

Breakout Confirmation: A close above the neckline with

above average volume.

Measuring Technique: Measure the distance between

the rst high to the low of the head, and then add that
amount to the neckline on the breakout.
25.
Head & Shoulders (Inverted
Continuation)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the bottom

of a downtrend and is identi ed by three-peak formation
with the center peak, or high, forming a higher high than
the other two. The neckline is a trend-line that is drawn
across the intervening lows and should be horizontal or
upward sloping to the breakout area. There should be a
degree of symmetry between the formation of the two
shoulders and the head.

Volume Description: Volume tends to be high leading

into the upward move of the rst shoulder, diminishes as
the price falls completing the left shoulder, is balanced
during the formation of the head, and expands as the
price breaks below the neckline.

Breakout Confirmation: A close below the neckline

with above average volume.

Measuring Technique: Measure the distance between

the rst low to the high of the head, and then subtract
that amount from the neckline on the breakout.
26.
Head & Shoulders (Complex)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the top of a

uptrend and is identi ed by a multiple shoulders and/or
head formation. The neckline is a trend-line that is
drawn across the intervening lows and should be
horizontal or upward sloping to the breakout area. There
should be a degree of symmetry between the formation
of the shoulders and head(s).

Volume Description: Volume tends to be higher on the

left shoulders during the up-moves, balanced toward the
head(s) and expanding on the breakout below the
neckline.

Breakout Confirmation: A close below the neckline

with above average volume.

Measuring Technique: Measure the distance between

the rst low to the high of the head, and then subtract
that amount from the neckline on the breakout.
Statistical Notes: Gaps on the breakout day tend to help
performance along with upward-sloping necklines.
27.
Horn Bottoms
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern is formed on a weekly

chart with two downward price spikes separated by a
week. The center week should form signi cantly higher
low than the other two weeks.

Volume Description: Volume tends to be higher on the

rst downward spike and lower on the second.

Breakout Confirmation: A close above the highest high

within the 3-week range.

Measuring Technique: The price target is set by taking

the di erence between the highest high and lowest low
in the 3-week period, and then adding that amount to
the highest high.

Statistical Notes: Horn formations perform best when

the right spike range falls within the range of the left
28.
Horn Tops
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This is a rare pattern that is

formed on a weekly chart with two upward price spikes
separated by a week. The center week should form
signi cantly lower high than the other two weeks.

Volume Description: Volume tends to be higher on the

rst upward spike and lower on the second.

Breakout Confirmation: A close above the lowest low

within the 3-week range.

Measuring Technique: The price target is set by taking

the di erence between the highest high and lowest low
in the 3-week period, and then subtracting that amount
from the lowest low. Statistical Notes: Horn formations
perform best when the left spike range falls within the
range of the right
29.
Island Reversals
NON-DIRECTIONAL

REVERSAL

Pattern Description: There is a price gap either up or

down and then a subsequent gap back to the previous
level before the initial gap leaving an island in the price
chart. The average length of an island just over a month
but can last as little as a single day to over 6 months.

Volume Description: Volume tends to decline after the

initial surge on the rst gap, and then expands on the
second gap.

Breakout Confirmation: A gap to the previous level

before the initial gap with above average volume.

Measuring Technique: Take the range between the

highest high and low of the island and add or subtract
that amount from the highest high or low depending on
whether it is a bullish or bearish gap.

Statistical Notes: Pullback and throwbacks hurt

performance, and short patterns with a wider range
from high to low perform best.
30.
Pennants (Bullish)
CONTINUATION

BULLISH

Pattern Description: This pattern occurs within the

context of a longer uptrend and following a steep, quick
upward move. Following the move, the pattern then
forms a short triangle formation with converging
trendlines. The pennant portion of the pattern shouldn’t
last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn across the highs with above average volume.

Measuring Technique: Measure the length of the

previous steep move leading into the pennant, and then
add that amount to the breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
Pennant formations that breakout in the direction of the
prevailing market trend tend to perform better, and
pennants without gaps tend to perform better.
31.
Pennants (Bearish)
BEARISH

CONTINUATION

Pattern Description: This pattern occurs within the

context of a longer downtrend and following a steep,
quick downward move. Following the move, the pattern
then forms a short triangle formation with converging
trend-lines. The ag portion of the pattern shouldn’t last
more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn across the lows with above average volume.

Measuring Technique: Measure the length of the

previous steep move leading into the pennant, and then
subtract that amount from the breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
Pennant formations that breakout in the direction of the
prevailing market trend tend to perform better, and
pennants without gaps tend to perform better.
32.
Pipe Bottoms
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: Two consecutive downward intra-

week price spikes on a weekly chart.

Volume Description: Volume tends to be higher for the

left spike than the right, but both weeks tend to have
above average volume.

Breakout Confirmation: A close above the highest high

of the two weekly spikes with above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the two pipes, and then
add it to the highest high.

Statistical Notes: Throwbacks hurt performance, and

wider ranges between highs and lows perform better
than shorter ranges. A right spike range that falls within
the range of the left spike performs best.
33.
Pipe Tops
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: Two consecutive upward intra-

week price spikes on a weekly chart.

Volume Description: Volume tends to be higher for the

left spike than the right, but both weeks tend to have
above average volume.

Breakout Confirmation: A close below the lowest low of

the two weekly spikes with above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the two pipes, and then
subtract it from the lowest low.

Statistical Notes: Throwbacks hurt performance, and

wider ranges between highs and lows perform better
than shorter ranges. A right spike range that falls within
the range of the left spike performs best. 34
34.
Rectangle Bottoms
Directional Bias: Bullish or Bearish

Pattern Type: Reversal or Continuation

Pattern Description: A rectangle is a non-directional

pattern that can result in either a bullish or bearish
breakout. A Rectangle Bottom is de ned by the previous
downtrend before the formation. The formation is when
the price oscillates between two horizontal price levels or
channel.

Volume Description: Volume tends to decrease

throughout the formation regardless of the direction it
breaks out and expands on the breakout.

Breakout Confirmation: A close above or below the

channel with above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the channel and then add
or subtract that amount from the channel depending on
the direction it breaks out.

Statistical Notes: Throwbacks hurt performance, and

wider ranges between highs and lows perform better
than shorter ranges. Rectangles without a preformation
rise or fall and which have rising volume trends
35.
Rectangle Tops
Directional Bias: Bullish or Bearish

Pattern Type: Reversal or Continuation

Pattern Description: A rectangle is a non-directional

pattern that can result in either a bullish or bearish
breakout. A Rectangle Top is de ned by the previous
uptrend before the formation. The formation is when the
price oscillates between two horizontal price levels or
channel.

Volume Description: Volume tends to decrease

throughout the formation regardless of the direction it
breaks out, and expands on the breakout.

Breakout Confirmation: A close above or below the

channel with above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the channel and then add
or subtract that amount from the channel depending on
the direction it breaks out.

Statistical Notes: Throwbacks hurt performance, and

wider ranges between highs and lows perform better
than shorter ranges. Rectangles with a falling volume
trend and high volume on the breakout tend to
36.
Rounding Bottoms
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: A Rounding Bottom pattern is a

continuation pattern of the prevailing uptrend. The
pattern forms a concave or “rounded” bottom to its price.

Volume Description: Volume will tend to mirror the

price as it rises and falls with the price then expands on
the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close above the lip of the Rounding Bottom
on above average volume. This can be di cult at times
when there isn’t an apparent lip on the left-hand side of
the formation.

Measuring Technique: Subtract the height of the

highest high and lowest low of the Rounding Bottom and
then add that to the breakout level.

Statistical Notes: Throwbacks hurt performance, and

patterns with wide ranges between highs and lows or
37.
Rounding Tops
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: A Rounding Top pattern is a

continuation pattern of the prevailing downtrend. The
pattern forms a concave or “rounded” top to its price.

Volume Description: Volume will tend to have a u-

shaped pattern and expand on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the lip of the Rounding Top on
above average volume. This can be di cult at times
when there isn’t an apparent lip on the left-hand side of
the formation.

Measuring Technique: Subtract the height of the

highest high and lowest low of the Rounding Top and
then subtract that from the breakout level.

Statistical Notes: Throwbacks hurt performance, and

patterns with wide ranges between highs and lows or
38.
Scallops (Ascending)
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: A Scallop forms a high, corrects a

little before forming a higher high. The pattern looks like
the letter “J.”

Volume Description: Volume will tend to mirror the

price as it rises and falls with the price then expands on
the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the rising J formation on above
average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then
subtract that value from the breakout level.

Statistical Notes: Breakouts near a 1-year low perform

best along with taller formations with a rising volume.
39.
Scallops (Inverted Ascending)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: The pattern occurs within an

uptrend and looks like a backwards and upside-down J
with the price rising to a rounded high and a slight
decline.

Volume Description: Volume will tend experience a

rising volume trend and expand on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close above the rounded top of the formation
on above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then add
that value to the breakout level.

Statistical Notes: Breakouts near a 1-year high perform

best along with taller formations with a rising volume.
40.
Scallops (Descending)
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: A Scallop occurs within a

downtrend and is formed as the price falls before
forming a rounded bottom and then corrects upward.
The pattern looks like a backwards letter “J.”

Volume Description: Volume will tend to be dome-

shaped and expand on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the rising backwards J formation
on above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then
subtract that value from the breakout level.

Statistical Notes: Breakout day gaps on high volume

perform best.
41.
Scallops (Inverted Descending)
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: The pattern occurs within a

downtrend and looks like an upside-down J with the
price rising slightly to a rounded high and a larger
decline.

Volume Description: Volume will tend experience a u-

shaped volume trend and expand on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the low of the upside-down J on
above average volume, following a short bullish bounce
in the price.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then
subtract that value from the breakout level.

Statistical Notes: Breakouts near a 1-year low perform

best along with taller formations with a u-shaped
volume trend.
42.
Three Falling Peaks
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: A pattern of three proportionally

lower highs that typically occur at the end of an uptrend.

Volume Description: The pattern performs best with a

u-shaped volume trend and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the lowest low of the formation
on above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then
subtract this amount from the breakout level. With this
pattern, the measured move isn’t achieved with
regularity.

Statistical Notes: Short and narrow patterns with u-

shaped volume perform best.
43.
Three Rising Valleys
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: A pattern of three proportionally

higher lows that typically occur at the end of a
downtrend.

Volume Description: The pattern typically exhibits a

dome-shaped volume trend during the formation and
expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the highest high of the formation
on above average volume.

Measuring Technique: Subtract the height of the

highest high and lowest low of the pattern and then add
this amount to the breakout level. With this pattern, the
measured move isn’t achieved with regularity.

Statistical Notes: Breakouts near one-year highs

perform best. Wide ranges between highs and lows with
ushaped volume do well.
44.
Triangles (Ascending)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within an

uptrend and consists of equal highs and rising lows
forming a triangle. The pattern should breakout within
two-thirds to three-quarters of the way to the apex of the
triangle.

Volume Description: The volume declines throughout

the triangle formation and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close above the highs on above average
volume.

Measuring Technique: Subtract the height of the highs

and lowest low of the pattern and then add this amount
to the breakout level.

Statistical Notes: Performs better with rising volume on

the breakout, with throwbacks hurting performance.
45.
Triangles (Descending)
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: This pattern occurs within a

downtrend and consists of equal lows and falling highs
forming a triangle. The pattern should breakout within
two-thirds to three-quarters of the way to the apex of the
triangle.

Volume Description: The volume declines throughout

the triangle formation and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the lows on above average
volume.

Measuring Technique: Subtract the height of the lows

and highest high of the pattern and then subtract this
amount from the breakout level.

Statistical Notes: Performs better with rising volume on

the breakout, with pullbacks hurting performance.
46.
Triangles (Symmetrical)
Directional Bias: Bullish or Bearish

Pattern Type: Continuation or Reversal

Pattern Description: A Symmetrical Triangle is a non-

directional pattern that can result in either a bullish or
bearish breakout. This pattern consists of lower highs
and higher lows forming a triangle. The pattern should
breakout within two-thirds to three-quarters of the way
to the apex of the triangle.

Volume Description: The volume declines throughout

the triangle formation and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close above or below the converging trend-
lines on above average volume.

Measuring Technique: Subtract the height of the lowest

low and highest high of the pattern and then subtract or
add this amount to the breakout level depending on the
direction of the breakout. Statistical Notes: Performs
better near one-year highs or lows. Throw-backs and
pull-backs hurt performance.
47.
Triple Bottoms
Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer downtrend. The pattern forms three
equal lows.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-

line drawn horizontally across the intervening highs
between the lows with above average volume.

Measuring Technique: Measure the distance between

the high and the two lows and add it to the breakout
level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
Formations with declining volume with heavy volume
on the left bottom performs better.
48.
Triple Tops
Directional Bias: Bearish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the

context of a longer uptrend. The pattern forms three
equal highs.

Volume Description: Volume tends to drift downward

during the formation and expand on the breakout.

Breakout Confirmation: A close below the lower trend-

line drawn horizontally across the intervening lows
between the highs with above average volume.

Measuring Technique: Measure the distance between

the low and the two highs and subtract it from the
breakout level.

Statistical Notes: Formations with more range between

highs and lows perform better than shorter ranges.
Formations with declining volume with heavy volume
on the left top performs better.
49.
Wedges (Falling)
Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within an

uptrend and consists of lower lows and lower highs
forming a falling wedge shape. The descending trend-
lines across the highs and lows should have at least ve
touches between them. The pattern should breakout
within two-thirds to three-quarters of the way to the
apex of the wedge.

Volume Description: The volume declines throughout

the wedge formation and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close above the upper descending trend-line
drawn across the highs on above average volume.

Measuring Technique: The projected target price for this

pattern is the highest high of the formation.

Statistical Notes: Performs better with rising volume on

the breakout, with pullbacks hurting performance.
50.
Wedges (Rising)
Directional Bias: Bearish

Pattern Type: Continuation

Pattern Description: This pattern occurs within a

downtrend and consists of rising highs and lows forming
a rising wedge shape. The ascending trend-lines across
the highs and lows should have at least ve touches
between them. The pattern should breakout within two-
thirds to three-quarters of the way to the apex of the
triangle.

Volume Description: The volume declines throughout

the wedge formation and expands on the breakout.

Breakout Confirmation: The con rmation for this

pattern is a close below the lower ascending trend-line
drawn across the lows on above average volume.

Measuring Technique: The projected target price for this

pattern is the lowest low of the formation.

Statistical Notes: Performs better with rising volume on

the breakout, with pullbacks hurting performance.
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