Classic Chart Patterns

"Shapes" that keep repeating

Head and shoulders tops / bottoms and double tops / bottoms tend to appear at the end of a trend; triangles and flags are often pauses in the middle of one.

Complete only on a breakout; the height estimates the target

A pattern is only complete once price breaks the neckline or boundary. Measure the pattern's height from the breakout point and you get the usual measured move target.

Heavy volume is more believable; falling back cancels it

Rising volume on the breakout makes a pattern more believable. If price breaks out and then falls back inside the pattern, the market has rejected it: the original read is off, and a failed pattern sometimes sets off a move the other way.

Key takeaways

• Reversal patterns (head and shoulders, double tops and bottoms) often appear at the end of a trend; continuation patterns (triangles, flags) are often a pause mid-trend.
• A pattern is complete only after the price breaks the neckline or boundary; a breakout on high volume is more trustworthy.
• Targets are often estimated from the pattern's height (a measured move). That's only a guide: the price may stop short or run further.
• If the price breaks out and then falls back inside the pattern, the pattern has failed and your original view should be dropped.

Try it yourself

You can do these exercises in this lesson's interactive simulation:

1. Click "Example: head and shoulders top, neckline $100 · head $120": what's the pattern height? Where does the target land?
2. Choose "Double bottom" and play bar by bar: what does the status show when the second bottom appears? At what moment does it change to "Broken out"?
3. Choose "Ascending triangle": horizontal resistance $110, first low $102. What's the measured target?
4. Compare "Flag" with "Symmetrical triangle": where is each height measured from? Did price eventually reach the target?

Quiz and explanations

1. When is a double bottom confirmed?

Answer: When the price breaks above the neckline (the high between the two bottoms).Until it breaks the neckline, it's just two declines.

2. A head and shoulders top has its neckline at $100 and its head at $120. Based on the pattern's height, roughly where's the downside target?

Answer: $80.The pattern is $20 tall, so measure $20 down from the neckline.

3. The price breaks above a double bottom's neckline, then two days later falls back below it and breaks the second bottom. What does this mean?

Answer: The pattern failed, and the original bullish view should be dropped.When the price rejects a pattern, admitting you're wrong quickly matters more than clinging to a "target".

Terms in this lesson

• breakout (Breakout): Price decisively moving past support, resistance or a pattern boundary, often on rising volume.
• double bottom (Double Bottom): A W-shaped bottom reversal pattern of two similar lows, confirmed when price breaks above the neckline.
• flag (Flag): A small counter-move after a sharp rally (or drop), often a pause before the trend continues.
• head and shoulders (Head & Shoulders): A top reversal pattern of three peaks (left shoulder, head, right shoulder), confirmed when price breaks the neckline.
• measured move (Measured Move): A reference target found by projecting a pattern's height from the breakout point in the breakout direction; it's an estimate, not a guarantee.
• neckline (Neckline): The line joining key highs or lows in a head and shoulders or double top/bottom; breaking it completes the pattern.
• triangle (Triangle): A narrowing pattern of lower highs and higher lows (or one side flat), waiting for a breakout in either direction.