Chart Patterns Cheat Sheet

Formation: A sharp rally (the pole) followed by a tight, downward-sloping parallel channel (the flag) as the market pauses

Why it works: The pullback is shallow and orderly, showing profit-taking rather than genuine selling pressure. The trend's underlying bid remains intact.

Entry: On the break of the flag's upper trendline, with stop below the flag's low. Target = pole height projected from breakout point (measured move).

Reliability: ⭐⭐⭐⭐ (High when the pole is a strong impulsive move on heavy volume and the flag stays tight)

Volume cue: The pole should form on expanding volume; the flag should show declining volume; the breakout should pop on a fresh volume surge.

Formation: A sharp rally (the pole) followed by a small symmetrical, contracting triangle as volatility compresses

Why it works: Converging price action signals indecision resolving in the direction of the prior trend. The compressed energy releases in a sharp move.

Entry: On the break of the pennant's upper trendline, with stop below the pennant's low. Target = pole height projected upward.

Reliability: ⭐⭐⭐⭐ (Best when it forms quickly, within 1-3 weeks; slow pennants tend to morph into symmetrical triangles)

Watch for: The breakout candle should close decisively above the upper line — wicks above don't count.

Formation: A flat horizontal resistance line capping a series of rising higher lows — at least two touches on the top, two on the rising bottom

Why it works: Buyers grow more aggressive on each dip while sellers defend a fixed price, until buying pressure overwhelms the supply at the ceiling. It's a coiled spring with a clear release valve.

Entry: On a decisive close above the flat resistance line, with stop below the most recent higher low. Target = height of triangle added to breakout point.

Reliability: ⭐⭐⭐⭐ (Stronger with-trend than as a standalone reversal signal at a major bottom)

Volume profile: Volume typically contracts as the triangle forms, then expands on the breakout. A breakout on weak volume is suspect — wait for a retest.

Formation: Two downward-sloping trendlines converging as both highs and lows fall, with the decline losing momentum. Lower trendline is steeper, which gives the wedge its falling angle.

Why it works: Shrinking downside momentum signals sellers are running out of conviction. Each new low attracts buyers earlier, while each bounce meets weaker resistance.

Entry: On the break of the upper wedge trendline, with stop below the most recent swing low. Target = the back-side of the wedge measured from the breakout.

Reliability: ⭐⭐⭐⭐ (Works as continuation in an uptrend or reversal after a downtrend — context determines which)

Distinguishing trick: Look at the prevailing trend before the wedge forms. Uptrend → expect continuation higher. Downtrend → wedge could be the first sign of reversal, but wait for confirmation.

Formation: A rounded "cup" recovery back to the prior high, followed by a small downward-drifting "handle" pullback. The cup should look like a "U", not a sharp "V" — sharp Vs signal unstable bottoms.

Why it works: The gradual cup shows steady accumulation over weeks or months. The shallow handle shakes out late sellers and weak longs who took profit too early, before the real breakout move.

Entry: On the break of the handle's upper trendline (which usually sits just below the cup's right rim), with stop below the handle's low. Target = cup depth added to breakout point.

Reliability: ⭐⭐⭐⭐ (Handle should stay shallow — a deep handle weakens the pattern. A handle that retraces more than 50% of the cup often invalidates the setup.)

Timeframe note: Cup and handles take time. The most reliable ones develop over 1-6 months on the daily chart. Intraday versions exist but are far less reliable.

Formation: A sharp decline (the pole) followed by a tight, upward-sloping parallel channel (the flag) as the market pauses. The flag tilts against the prevailing trend, which is the signature feature.

Why it works: The bounce is shallow and orderly, reflecting short-covering and bargain-hunting rather than genuine new buying demand. The dominant supply remains in control.

Entry: On the break of the flag's lower trendline, with stop above the flag's high. Target = pole height projected downward from the breakout.

Reliability: ⭐⭐⭐⭐ (High when the pole is a strong impulsive move. Flags that drift sideways for too long tend to turn into rectangles and lose their directional bias.)

Symmetry check: A good flag retraces roughly 38.2% of the prior pole — much more than that and the trend is in danger of reversing.

Formation: A sharp decline (the pole) followed by a small symmetrical, contracting triangle as volatility compresses

Why it works: Converging price action signals indecision resolving in the direction of the prior downtrend. Coiled selling pressure releases violently.

Entry: On the break of the pennant's lower trendline, with stop above the pennant's high. Target = pole height projected downward.

Reliability: ⭐⭐⭐⭐ (Best when it forms quickly, within 1-3 weeks. Slow pennants are more likely to morph into a reversal base.)

Where they appear: Bearish pennants often form right after a major news event or earnings miss — a sharp drop followed by a "wait and see" pause before the next leg down.

Formation: A flat horizontal support line under a series of falling lower highs. Each new rally is shorter than the last, while support holds firm.

Why it works: Sellers grow more aggressive on each rally while buyers defend a fixed price, until selling pressure overwhelms demand at the floor. The pattern is the inverse mirror of an ascending triangle — same psychology, opposite direction.

Entry: On a decisive close below the flat support line, with stop above the most recent lower high. Target = height of triangle projected down from the breakout.

Reliability: ⭐⭐⭐⭐ (Stronger with-trend than as a standalone reversal signal at a major top)

What to avoid: A descending triangle that forms at a major multi-year support is more likely to break up than down. Context flips the read.

Formation: Two upward-sloping trendlines converging as both highs and lows rise, with the rally losing momentum. The lower trendline is steeper, giving the wedge its rising angle.

Why it works: Shrinking upside momentum signals buyers are running out of conviction. The pattern is "running out of oxygen" — each new high is harder to reach.

Entry: On the break of the lower wedge trendline, with stop above the most recent swing high. Target = back-side of the wedge measured from breakout.

Reliability: ⭐⭐⭐⭐ (Works as continuation in a downtrend or reversal after an uptrend. Rising wedges that break up are rare — when they do, treat them as a major trend shift signal.)

Common trap: Rising wedges look bullish on first glance because price is making higher highs. Don't fall for the obvious direction — the structure is bearish.

Formation: An inverted "U" — a rounded top followed by a small upward-drifting "handle" bounce — before price breaks lower.

Why it works: The rounded top shows steady distribution into strength (smart money selling into retail demand). The small handle attracts late buyers who then get trapped when the breakdown hits.

Entry: On the break of the handle's lower trendline, with stop above the handle's high. Target = depth of the cup projected from the breakout.

Reliability: ⭐⭐⭐ (Less commonly traded than the bullish version — fewer statistically significant studies. Best confirmed with a major resistance level at the rim.)

Volume profile: Look for the right rim of the cup to form on heavy volume, and the handle bounce to occur on declining volume — that combination is the cleanest distribution signature.

Formation: A "W" shape — price falls to a low, rallies, then falls back to roughly the same low before reversing higher. The two lows should be separated by 1-3 months and form at the same horizontal level.

Why it works: The second failed attempt to make a new low shows sellers have exhausted their momentum. Buyers who missed the first bounce get a second chance, often in size.

Entry: On the break of the neckline (the high between the two bottoms), with stop below the second bottom. Target = distance from lows to neckline projected upward.

Reliability: ⭐⭐⭐⭐ (Higher when the two lows aren't identical — identical lows at round numbers often act as liquidity grabs rather than true reversals.)

Volume signature: Volume on the first low is often heavy (capitulation). Volume on the second low is typically lighter (no fresh sellers). The neckline break should be on a volume surge.

Formation: Three roughly equal lows in a row, each rejected at the same support zone before price finally breaks higher. The three tests should be separated by 1-2 months each.

Why it works: Three failed attempts to break the level show a heavily defended demand zone that sellers cannot overcome. By the third test, the path of least resistance is up.

Entry: On the break of the resistance line connecting the peaks between the three lows, with stop below the third bottom. Target = the depth of the pattern projected upward.

Reliability: ⭐⭐⭐⭐⭐ (Rarer than a double bottom, but a stronger signal when it forms — three tests is statistically a more defended level than two.)

Warning: A triple bottom that breaks down on the third test is a major bearish signal — that level of support failure often leads to a fast, sharp move.

Formation: An "M" shape — price rallies to a high, pulls back, then rallies to roughly the same high before reversing lower.

Why it works: The second failed attempt to make a new high shows buyers have exhausted their momentum. Sellers who missed the first short get a second chance.

Entry: On the break of the neckline (the low between the two tops), with stop above the second top. Target = distance from highs to neckline projected downward.

Reliability: ⭐⭐⭐⭐ (Higher when the two highs aren't identical — identical highs at round numbers often act as liquidity grabs before a continued move higher.)

Bearish trap: Watch out for the inverse — a "double top" that breaks upward. In strong trends, two failed attempts at a level often resolve to the upside, not down. Don't pre-commit to the direction.

Formation: Three roughly equal highs in a row, each rejected at the same resistance zone before price finally breaks lower. The three tests should be separated by 1-2 months each.

Why it works: Three failed attempts to break resistance show that supply is overwhelming demand at this level. The market exhausts its buying capacity through repetition.

Entry: On the break of the support line connecting the troughs between the three highs, with stop above the third top. Target = height of the pattern projected downward.

Reliability: ⭐⭐⭐⭐⭐ (Rarer than a double top, but a stronger reversal signal — three tests of resistance with no follow-through is a major distribution signature.)

Volume profile: The first top should form on heavy volume (euphoria). Each subsequent top should show declining volume (fewer buyers stepping in). The breakdown is confirmed by a fresh volume expansion.

Formation: A slow, smooth arc as price grinds up, stalls, and rolls over — the mirror image of a rounding bottom. Develops over weeks or months.

Why it works: Buying momentum fades gradually rather than snapping, reflecting a slow distribution of positions into strength. By the time the rollover happens, most buyers are trapped above.

Entry: On a confirmed break below the arc's rising trendline or a prior swing low, with stop above the rounded high. Target = depth of the arc projected downward.

Reliability: ⭐⭐⭐ (Develops slowly — best confirmed on higher timeframes to avoid false starts. Mid-arc price action is choppy and hard to read.)

Better version — Bump and Run: The textbook Bump and Run has a steep "bump" phase (overheating), then a rounded "run" phase (the actual reversal). The bump should be 2-3x the slope of the prior trend for the highest reliability.

Formation: A "U" shape — price falls, levels off, then gradually rises. The mirror image of a rounding top.

Why it works: Selling pressure exhausts slowly while buyers begin quietly accumulating at lower prices. The transition is so gradual that most trend-followers miss it entirely.

Entry: On a confirmed break above the rim of the saucer (the prior swing high), with stop below the lowest point of the curve. Target = depth of the curve projected upward.

Reliability: ⭐⭐⭐⭐ (More reliable than a rounding top because bottoms tend to take longer to form than tops. Avoid trying to pick the exact bottom — wait for the rim to break.)

Common error: Anticipating the reversal before the right rim breaks. The pattern can take 2-6 months to play out, and many false starts happen along the way. Be patient.

Formation: Three peaks — a left shoulder, a higher head, and a right shoulder roughly level with the left, sitting on a neckline (the support line connecting the two troughs).

Why it works: The failure to exceed the head on the right shoulder shows buying momentum is fading at the top of the trend. The pattern traces a transition from "buying dips" to "selling rallies."

Entry: On the break of the neckline, with stop above the right shoulder. Target = distance from head to neckline projected downward from the breakout.

Reliability: ⭐⭐⭐⭐⭐ (One of the most statistically reliable reversal patterns when the neckline break is decisive. Bulkowski's studies show ~83% break-down rate with average decline of 22% on completion.)

Variants: A neckline that slopes upward (rising neckline) is a stronger signal than a flat one. A neckline that slopes downward often produces a less reliable pattern. Volume should be lowest on the head and highest on the neckline break.

Formation: Three troughs — a left shoulder, a lower head, and a right shoulder roughly level with the left, sitting under a neckline. The mirror image of H&S.

Why it works: The failure to make a new low on the right shoulder shows selling momentum is fading at the bottom of the trend. The pattern marks the transition from "selling rallies" to "buying dips."

Entry: On the break of the neckline, with stop below the right shoulder. Target = distance from head to neckline projected upward from the breakout.

Reliability: ⭐⭐⭐⭐⭐ (One of the most statistically reliable reversal patterns. Studies show it completes upward roughly 86% of the time with average gains near 38%.)

Volume signature: Volume is highest on the left shoulder (initial capitulation), lowest on the head (selling exhausted), and expanding on the right shoulder as buyers quietly return. The neckline break should come on a clear volume surge.

Formation: Three points: a swing high (1), a retracement (2) that doesn't break the prior trend's structure, and a higher low (3) that breaks above point 1. The bearish version is the mirror image.

Why it works: It's a cleaner, more flexible way to read trend transitions. The pattern formalizes what every trend trader feels: "the trend is over when the swing high fails and price reclaims it."

Entry: Long: on the break above point 1 (after point 3 forms a higher low). Short: on the break below point 1 (after point 3 forms a lower high). Stop on the other side of point 2.

Reliability: ⭐⭐⭐⭐ (Highly reliable when point 2 is a clean 50-61.8% Fibonacci retracement of the prior move. Works across all timeframes and instruments.)

Why it works better than eyeballing: The pattern forces you to wait for confirmation — you don't enter until the breakout of point 1 happens, which filters out the majority of failed reversals.

Formation: A sharp, sudden reversal that looks like the letter "V" — one or two strong candles that wipe out weeks of opposite-direction movement. Often triggered by surprise news, earnings, or sentiment shocks.

Why it works: V-tops/bottoms reflect rapid shifts in crowd psychology. A single catalyst (rate decision, geopolitical event, earnings beat) flips the entire narrative in one session.

Entry: The pattern itself is the entry — there's no setup, only reaction. Aggressive traders buy/sell the reversal candle. Conservative traders wait for a pullback to test the breakout level (former support becomes new resistance, or vice versa).

Reliability: ⭐⭐⭐ (Low standalone reliability — the move is fast and hard to enter profitably. Best traded with confirmation, like a key level break after the V.)

When to skip: If the V happens in the middle of a strong trend with no major resistance/support nearby, treat it as a counter-trend bounce, not a reversal. Most V-bottoms in raging bear markets fail.

Formation: A diverging pattern where each new swing high is higher and each new swing low is lower. The price range expands as the pattern develops, creating a megaphone or broadening shape.

Why it works: Increasing volatility and disorder signals emotional, indecisive markets. The pattern typically resolves once the market commits to a direction — and that direction is usually the one that began the prior trend.

Entry: On the break of the lower trendline (in a bearish broadening top) or upper trendline (in bullish broadening bottom). Stop on the opposite side of the most recent swing.

Reliability: ⭐⭐⭐ (Unreliable on its own — broadening patterns often produce several false breakouts before resolving. Best combined with volume and prior support/resistance.)

Where they appear: Often at major market tops, when euphoric buyers and panicking sellers both get aggressive. Watch for volume to spike on the breaks, not on the swings within the pattern.

Formation: A diamond shape — price expands in the middle of the pattern (widening swings) and then contracts toward the right side. It looks like a head and shoulders rotated 90 degrees, or a symmetrical triangle's opposite.

Why it works: The widening swings reflect panic and euphoria. The narrowing second half shows that volatility is compressing and a major decision is imminent.

Entry: On the break of the right-side support (diamond top) or resistance (diamond bottom). Stop beyond the widest point of the diamond. Target = height of the pattern projected from the breakout.

Reliability: ⭐⭐⭐ (Rare but powerful when they form. Often occur at major market tops after a blow-off move. Best traded with volume confirmation on the breakout.)

Distinguishing feature: The diamond's widest point is roughly in the middle of the pattern, not at the start. That's what separates it from a broadening top, which keeps widening to the right.

Formation: A descending resistance line and an ascending support line converging toward a single point. The pattern needs at least two swing highs and two swing lows to be valid.

Why it works: Contracting price swings show compressing volatility as buyers and sellers reach equilibrium before a breakout. Energy builds in the same way it does in a coiled spring.

Entry: Trade the direction of the confirmed breakout (close outside the trendline), with stop on the opposite side of the triangle. Target = height of the triangle added to breakout point.

Reliability: ⭐⭐⭐ (Direction is unknown until the break — treat the pattern as neutral, not directional. Roughly 60% of symmetrical triangles break in the direction of the prior trend.)

Anti-pattern warning: Don't pre-commit to direction. Half the time, "this looks bullish" gets run over. The 50% rule: wait for a full candle close outside the trendline before pulling the trigger.

Formation: Price oscillates between two horizontal levels — a clear resistance above and a clear support below — with at least two touches on each side.

Why it works: Buyers and sellers are in balance. Each test of the range extremes exhausts one side until the equilibrium breaks. The pattern can resolve in either direction, so the breakout trade is direction-agnostic.

Entry: Two valid approaches: (1) Breakout trade on close outside the range, with stop on the opposite side. (2) Mean-reversion trade at the extremes, with stop beyond the range boundary.

Reliability: ⭐⭐⭐ (Direction-agnostic — reliability depends heavily on context. A rectangle in a strong trend is more likely to break in the trend's direction.)

Sweet spot: Rectangles that form after extended trends (rather than at the start of one) often produce the cleanest breakouts. Watch for the fourth or fifth test of the boundary — the longer the range holds, the more violent the eventual break.

Formation: Three successive higher highs (or lower lows), each followed by a similar corrective pullback. The pattern is the inverse of an ABC correction — instead of one move with two legs, it's three smaller moves with two pullbacks each.

Why it works: The pattern reflects exhaustion across three attempts. By the third drive, the market has run out of momentum and reverses hard. Harmonic in flavor because each drive is typically a Fibonacci extension of the prior one.

Entry: At the completion of drive 3, with stop beyond the third drive's extreme. Target = 61.8% or 100% retracement of the entire three-drive sequence.

Reliability: ⭐⭐⭐⭐ (Surprisingly robust when each drive retraces 61.8% of the prior one — that's the harmonic flavor. Best combined with a key support/resistance at the third drive.)

Distinguishing from a wave count: Three drives is the completed sequence — not in progress. If you're only seeing two drives so far, you're in the middle of the pattern, not at the entry point.

Formation: A gap that forms at the breakout of a major consolidation pattern (rectangle, triangle, base) or key support/resistance. Marks the start of a new trend move.

Why it works: The gap reflects a sudden shift in sentiment — often news-driven — that breaks the prior equilibrium. Volume is typically high.

Entry: On the close of the gap candle, with stop below (or above for shorts) the gap itself. The gap acts as a magnet for stop placement — the pattern fails if price closes back into the gap.

Reliability: ⭐⭐⭐⭐ (Strong continuation signal. Breakaway gaps rarely fill in the short term — they tend to act as support/resistance for weeks or months.)

Formation: A small cluster of price action (the "island") isolated from the main trend by two gaps — one gap up (or down) into the island, and one gap down (or up) out of it. The island becomes a self-contained reversal block.

Why it works: The double gap signals a violent shift in market structure. Price gets trapped in the island, and when it breaks out the other side, the move is sharp and decisive.

Entry: On the close of the second gap (the one that breaks out of the island), with stop on the other side of the island's range. Target = height of the island projected from the breakout.

Reliability: ⭐⭐⭐⭐ (Rare but high conviction. Most reliable on daily/weekly charts of stocks and futures. Forex traders can find equivalents by using weekend gaps on DXY or JPY crosses.)

Formation: A gap that forms near the end of an extended trend, often on a final blow-off candle. Marks the last gasp of buyers (or sellers) before the trend reverses.

Why it works: Exhaustion gaps form when FOMO participants pile in at the extreme — a sign that the trend has run out of new buyers. The next session typically reverses.

Entry: Don't try to enter at the gap — wait for reversal confirmation (a close back inside the prior day's range, or a break of the gap's other side). Stop just beyond the gap.

Reliability: ⭐⭐⭐ (Hard to identify in real-time — exhaustion gaps look like breakaway gaps until the reversal happens. Use the location in the trend as the filter: gaps far from a prior consolidation are more likely exhaustion.)