How to Read Stock Index Chart Patterns for Beginner Traders

The common stock index chart patterns used to trade stock index that beginner stock index trades should know are explained below. These stock index chart pattern are grouped into reversal patterns and continuation trading patterns.

Reversal Chart Patterns

The commonly used stock index reversal chart patterns are:

Double Tops

Double tops stock index pattern is an M shaped 2 tops or 2 peaks pattern that forms on the stock index price chart during a stock index upwards trend.

Double tops stock index pattern is a bearish stock index pattern that forms when price reaches a resistance zone.

The stock index price will move upward and then dip slightly then turn up and move up to the top level where it had reached or slightly below this level then move downward again forming what is known as a double tops chart pattern.

Double Bottom

Double bottom stock index chart pattern is a W shaped two bottoms or two lows stock index pattern that forms on the stock index price chart during a stock index trading downwards trading trend.

Double bottom stock index chart pattern is a bullish stock index pattern that forms when price reaches a support zone.

The stock index price will move downward in then move up slightly then turn downwards and move downward to the bottom level where it had reached or slightly above this level then move up again forming what is known as a double bottoms trading pattern.

Head and Shoulders Chart Pattern

Head & 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 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.

Continuation Trading Patterns

Continuation stock index trading chart patterns are:

Rising Wedge or Ascending Wedge

Rising wedge is a continuation chart pattern that forms during an upwards stock index trend & this stock index patterns looks like a triangle stock index consolidation pattern that has a rising slope that is moving upward.

Rising wedge chart pattern has rising sloping support and resistance levels and this stock index pattern shows that stock index prices keep moving higher & once stock index prices move out of this rising wedge stock index pattern the upward trend is likely to continue.

Falling Wedge or Descending Wedge

Falling wedge is a continuation chart pattern that forms during a downwards stock index trend & this stock index patterns looks like a triangle stock index consolidation pattern that has a descending slope that's heading downward.

Falling wedge chart pattern has descending sloping support & resistance levels and this stock index pattern shows that stock index prices keep moving lower & once stock index prices move out of this descending wedge stock index pattern the downward stock index trend is likely to continue.

Bullish Pennant or Bearish Flag

Bullish Flag is a stock index pattern with parallel support & resistance levels that forms during a stock index upward trend and a stock index continuation signal is generated when the price moves above the bullish flag chart pattern and the upward trend continuation signal is generated by this continuation stock index bullish flag pattern.

Bearish Pennant or Bearish Flag

Bearish Flag is a stock index pattern with parallel support & resistance levels that forms during a stock index downward trend and a stock index continuation signal is generated when the price moves below the bearish flag chart pattern and the downward stock index trend continuation signal is generated by this continuation stock index bearish flag pattern.

How to Read Stock Index Chart Patterns for Beginner Traders