How to Read Different Types of Stock Index Chart Patterns for Beginner Traders

Continuation Trading Patterns

Continuation Chart Patterns

Pennant stock index pattern is a continuation pattern that looks like a symmetrical triangle in shape and is drawn using support & resistance lines.

Pennant chart pattern occur during a stock index trend - either upwards trend or downwards trend. These pennant chart patterns signal consolidation periods of the stock index price.

Bullish pennant trading pattern - occurs during an upward stock index trend direction and this bullish pennant chart pattern shows that stock index price has the potential to move upwards and continue in the overall upward stock index trend direction.

Bearish pennant chart pattern - occurs during a downward stock index trend direction and this bearish pennant chart pattern shows that stock index price has the potential to move downwards and continue in the overall downward stock index trend direction.

Continuation Chart Patterns

Stock Index wedge chart patterns are continuation chart patterns.

Bullish wedge stock index chart pattern - Rising Wedge, Ascending Wedge, Ascending Triangle is a bullish continuation chart pattern that signals stock index prices are likely to continue moving upwards once stock index prices move above this rising wedge chart pattern - ascending wedge stock index trading pattern.

Bearish wedge stock index chart pattern - Falling Wedge, Descending Wedge, Descending Triangle is a bearish continuation chart pattern that signals stock index prices are likely to continue moving downwards once stock index prices move below this falling wedge chart pattern - descending wedge stock index trading chart pattern.

Continuation Chart Patterns

Rectangle stock index chart pattern is a trend continuation pattern and this pattern has horizontal support and resistance areas.

Bullish rectangle pattern - When a rectangle pattern forms during a stock index upward trend it signals an upward stock index trend move is likely to follow next once stock index price breakout of this stock index triangle chart pattern.

Bearish rectangle pattern - When a rectangle pattern forms during a stock index downward trend it signals a downward stock index trend move is likely to follow next once stock index price breakout of this stock index triangle chart pattern.

Reversal Chart Patterns

Double Top Chart Pattern

Double tops stock index pattern is a reversal pattern that forms after a stock index uptrend & this stock index pattern forms 2 tops at approximately the same level.

Bearish Reversal Stock Index Signal - Double tops stock index pattern is a bearish reversal stock index trading signal.

Double Bottom Chart Pattern

Double bottom stock index pattern is a reversal pattern that forms after a stock index downtrend & this stock index pattern forms 2 bottoms at approximately the same level.

Bullish Reversal Stock Index Signal - Double bottoms stock index chart pattern is a bullish reversal stock index trading signal.

Head and Shoulders Chart Pattern

Head & Shoulders pattern is a reversal stock index pattern which forms at the tops of an upwards stock index trend. Head and Shoulders pattern is a bearish reversal pattern that forms after a stock index upwards trend.

There's an initial peak which is the first shoulder then a slight dip in stock index price, then a second higher peak which is the head then another stock index price dip followed by the last peak in stock index price which is the second shoulder.

The lowest points between the two stock index price lows forms the neckline & the reversal stock index signal from this head & shoulders chart pattern is confirmed once stock index price moves below this neckline.

Reverse Head and Shoulders Chart Pattern

Reverse Head and Shoulders pattern is a reversal stock index pattern that forms at the bottom of a downward stock index trend. Reverse Head and Shoulders chart pattern is a bullish reversal pattern that forms after a stock index trading downwards trading trend.

There is an initial dip which is the first inverse shoulder then a slight peak in the stock index price, then a second lower dip which is the reverse head then another stock index price peak followed by the last stock index price dip in stock index price which is the second inverse shoulder.

The highest points between the two stock index price peaks forms the neck-line and the reversal stock index signal from this reverse head & shoulders chart pattern is confirmed once stock index price moves above this neckline.

Consolidation Trading Patterns

Consolidation stock index Chart patterns are also known as symmetric triangles - the consolidation pattern looks like a symmetrical triangle.

Symmetrical triangle chart pattern signal a consolidation in the stock index price & a stock index price breakout is likely to happen on either side once the stock index price breaks out of this consolidation triangle trading pattern.

Stock Index traders will wait for the stock index price to break out in one direction before opening a stock index trade in direction of the stock index price breakout.

Summary:

Continuation Chart Patterns: Pennants - bullish pennant and bearish pennant, Wedges - Ascending wedge and descending wedges and Rectangles

Reversal Chart Patterns: Double Tops, Double Bottoms, Head and Shoulders, Reverse Head and Shoulders

Consolidation Chart Patterns: Symmetrical Triangles

How to Read Different Types of Stock Index Chart Patterns for Beginner Traders