Chart Patterns

Chart patterns are the sentences of technical analysis: multi-candle structures with a story inside. The story is always about the same two characters, conviction and doubt, taking turns. Patterns earn their keep two ways: they suggest direction, and, uniquely among chart tools, they suggest distance, how far the move might carry. That second gift is why traders bother naming shapes at all.

Two families

Continuation patterns are pauses inside a trend: the market catching its breath before continuing. Reversal patterns mark exhaustion, one side finally failing at a place that matters. The same skepticism applies to both: a pattern is a hypothesis until the breakout, and a probability afterward.

The continuations worth knowing

Flags and pennants. A sharp move (the pole), then a tight drifting pause against it (the flag), then, ideally, a breakout in the original direction. The classic measured move projects the pole's length from the breakout. Volume should quiet during the flag and expand on the break; a flag that rallies on heavy volume the wrong way isn't resting, it's reversing.

Triangles. Ascending (flat top, rising lows: buyers pressing), descending (the mirror), and symmetric (both sides compressing). Compression is the market coiling as ranges tighten; the breakout releases it. Symmetric triangles genuinely break either way, which is why honest traders trade the break, not the prediction. One more honesty note: the closer price grinds to the apex, the weaker the eventual break tends to be. Fresh compression beats stale.

Cup and handle. A rounded recovery to a prior high, a small pullback (the handle), then the break. It's accumulation drawn slowly: patient buyers absorbing sellers at gradually higher prices.

The reversals worth knowing

Head and shoulders. Three pushes at a top, the middle one highest, and a neckline under the lows. The third push failing lower than the second is the tell: buyers are running out. The breakdown through the neckline completes it, and the head-to-neckline height projects the target. Inverted, it marks bottoms the same way.

Double tops and bottoms. Two pushes to the same level, the second failing to get through. Here's the honest caveat most content skips: two touches of a level are ALSO how strong support and resistance looks. A "double top" isn't confirmed by touching twice; it's confirmed by breaking the valley between the touches. Before that break, you don't have a reversal, you have a range.

Breakouts, retests, and traps

The textbook entry is the breakout; the professional's favorite is often the retest, when price returns to the broken boundary and confirms the flip from Module 3. The retest offers a tighter stop and a cleaner invalidation, at the price of sometimes missing runners that never look back. And every breakout carries the possibility of the false break: price pokes through, triggers the obvious orders, and snaps back. False breaks aren't the pattern failing; they're part of the pattern's ecology, and they're why stops go beyond the zone, not inside it, and why size comes from Module 0 instead of confidence.