Chart patterns — flags, triangles & reversals

If candlesticks are individual words, chart patterns are full sentences. They form over dozens of candles and represent the market "taking a breath" or "changing its mind." There are two big families: continuation patterns (price pauses, then keeps going the same direction) and reversal patterns (price tops or bottoms and changes direction). Let's walk through the essential ones — each with its bullish and bearish version.

One principle before the shapes: patterns are only meaningful in the context of the trend that came before them. A "bull flag" only exists after a strong upward move. A pattern is the market resolving a tension between buyers and sellers, and the prior trend is what created that tension.

Flags — the classic continuation pattern

A flag forms after a sharp, near-vertical price move (the "flagpole"). After the big move, price consolidates in a small, tilted rectangle that drifts against the trend — traders taking profits and catching their breath. Then, if the trend is strong, price breaks out of the flag and continues in the original direction.

A bull flag drifts gently downward after a strong rally, then breaks upward. A bear flag drifts gently upward after a sharp drop, then breaks down. The logic: after a violent move, weak hands take profits and create a small counter-drift, but the dominant side is just reloading. A measured-move target is often roughly the height of the flagpole projected from the breakout point.

Pennants & wedges

Close cousins of flags. A pennant is like a flag but the consolidation converges into a small triangle instead of a parallel channel — same flagpole, same breakout idea. A wedge is a tilted converging pattern: a rising wedge (both lines sloping up but converging) is typically bearish, and a falling wedge (both sloping down, converging) is typically bullish. Wedges can act as either reversal or continuation depending on context, which is why beginners should treat them with extra caution.

Triangles — coiling energy

Triangles form when price gets squeezed into a tightening range — buyers and sellers reaching equilibrium until one side finally wins and price breaks out, often explosively. There are three types:

• Ascending triangle — a flat top (resistance) with a rising bottom (higher lows). Buyers keep stepping up while sellers defend one ceiling. Usually resolves upward (bullish).
• Descending triangle — a flat bottom (support) with a falling top (lower highs). Sellers keep pressing while buyers defend one floor. Usually resolves downward (bearish).
• Symmetrical triangle — both lines converging. Neutral; trade the direction of the breakout, don't predict it.

Double tops & double bottoms — reversal patterns

These mark the end of a trend rather than a pause. A double top looks like the letter "M": price rallies to a high, pulls back, rallies again to roughly the same high, and fails — it couldn't break through, so buyers give up and price reverses down. It signals a bullish trend may be ending. A double bottom is the "W": price drops to a low, bounces, drops to the same low, holds, and reverses up — a bearish trend may be ending.

Head & shoulders — the famous reversal

The head and shoulders is one of the most reliable reversal patterns. It has three peaks: a left shoulder, a higher head, and a right shoulder roughly level with the left. The line connecting the lows is the neckline. When price breaks below the neckline after the right shoulder, it signals the uptrend is reversing to a downtrend. The inverse head and shoulders is the bullish mirror — three troughs at a bottom — signaling a downtrend reversing up.