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Reversal Chart Patterns

Reversal Chart Patterns

Reversal Chart Patterns : any pattern on a chart that indicates a previous trend is changing to a new trend.

Double top

A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs. It is confirmed once the asset’s price falls below a support level equal to the low between the two prior highs.

Double bottom

A double bottom is an extremely bullish technical reversal pattern that forms after an asset reaches a low price two consecutive times with a moderate decline between the two lows. It is confirmed once the asset’s price rise above a resistance level equal to the high between the two prior lows.

Head and shoulder

In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal.The head and shoulders pattern forms when a stock’s price: Rises to a peak and subsequently declines back to the base of the prior up-move.

Inverse Head and shoulder

This pattern is the opposite of the popular head and shoulders pattern but is used to predict shifts in a downtrend rather than an uptrend.An inverse head and shoulders pattern is comprised of three component parts: After long bearish trends, the price falls to a trough and subsequently rises to form a peak.

Falling Wedge

This is a bullish pattern that begins wide at the top and contracts as prices move lower. This price action forms a cone that slopes down as the reaction highs and reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope and no bias, falling wedges definitely slope down and have a bullish bias. However, this bullish bias cannot be realized until a resistance breakout occurs.

Rising Wedge

A rising wedge in an uptrend is considered a reversal pattern that occurs when the price is making higher highs and higher lows. As the chart below shows, this is identified by a contracting range in prices. The price is confined within two lines which get closer together to create a pattern. This indicates a slowing of momentum and it usually precedes a reversal to the downside. This means that you can look for potential selling opportunities.

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