HOW DO YOU PREDICT BULISH PATTERNS

BULLISH CHART PATTERNS ::  EVERY TRADER SHOULD KNOW

CUP WITH HANDLE

 Directional Bias: Bullish

 Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer uptrend and is characterized by the price forming a u-shaped cup with a short handle on the right. The duration of the cup should last at least 7 weeks if using a daily chart.

Volume Description: Volume will typically follow the shape of the cup, with high volume as the left lip forms, falling volume as the bottom of the cup forms and rising volume toward the right lip and on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the handle with above average volume.

Measuring Technique: The price target is obtained by measuring the right lip to the bottom of the cup and then added to the price level of the right lip.

Statistical Notes: The pattern has a low failure rate but doesn’t move as strongly as other patterns. Patterns with shorter handles perform better than longer handles, and deeper cups with the left lip slightly higher than the right lip perform better.

DIAMOND BOTTOM

 Directional Bias: Bullish

 Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer downtrend. Initially the pattern begins a broadening formation with higher highs and lower lows, but then begins to narrow with lower highs and higher lows.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the downward-sloping highs with above average volume.

Measuring Technique: Measure the widest point of the diamond’s range and add it to the breakout level.

Statistical Notes: Breakouts nears the 1-year low typically outperform, and throwbacks following the breakout generally hurt performance. The pattern has a low failure rate with decent upside potential but tend to fallback once the target high is reached. Formations with more range between highs and lows perform better than shorter ranges.

 

DOUBLE BOTTOMS

Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs within the context of a longer downtrend. The pattern forms two equal lows with each low forming a v shaped bottom with a single day’s candle touching the low.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn horizontally across the intervening high between the lows with above average volume.

Measuring Technique: Measure the distance between the high and the two lows and add it to the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges.

FLAG BULLISH

Directional Bias: Bullish

Pattern Type: Continuation

Pattern Description: This pattern occurs within the context of a longer uptrend and following a steep, quick upward move. Following the move, the pattern then forms a short horizontal or downward sloping channel shaped like a flag. The flag portion of the pattern shouldn’t last more than 3-4 weeks if on a daily chart.

Volume Description: Volume tends to drift downward during the formation and expand on the breakout.

Breakout Confirmation: A close above the upper trend-line drawn across the highs with above average volume.

Measuring Technique: Measure the length of the previous steep move leading into the flag, and then add that amount to the breakout level.

Statistical Notes: Formations with more range between highs and lows perform better than shorter ranges. Flag formations that breakout in the direction of the prevailing market trend tend to perform better, and flags without gaps tend to perform better.

INVERTED HEAD AND SHOULDER

Directional Bias: Bullish

Pattern Type: Reversal

Pattern Description: This pattern occurs at the bottom of a downtrend and is identified by three-valley formation with the center valley, or low, forming a lower low than the other two. The neckline is a trend-line that is drawn across the intervening highs and should be horizontal or downward sloping to the breakout area. There should be a degree of symmetry between the formation of the two shoulders and the head.

Volume Description: Volume tends to be high leading into the down move of the first shoulder, diminishes as the price rises completing the left shoulder, is balanced during the formation of the head, and expands as the price breaks above the neckline.

Breakout Confirmation: A close above the neckline with above average volume.

Measuring Technique: Measure the distance between the first high to the low of the head, and then add that amount to the neckline on the breakout.