One of the cornerstones of technical analysis is chart patterns. Chart patterns are highly helpful as they enable you to look at the big picture and identify the upcoming price movements and trading signals.
There are many chart patterns available, signifying bullishness, bearishness, as well as the continuation of the prevailing trend.
Among them, the top 4 bullish patterns you must know about are
- Inverted Head and Shoulders
- Double Bottom
- Triple Bottom
- Rounding Bottom
Here is a brief overview of each of them.
#1 Inverted Head and Shoulders Pattern
Inverted Head and Shoulders Pattern is a bullish pattern that indicates a trend reversal from bearish to a bullish bias. The initial price trend would be downwards.
The pattern appears like three valleys. Among them, the valley in the middle would be lower than the other two valleys. Overall, it appears like the head and shoulders of an inverted person. The ‘neckline’ of the pattern would be formed by joining the two armpits.
Once the pattern is confirmed, price breaks out from the neckline.
The figure below shows an inverted head and shoulders pattern.
#2 Double Bottom Pattern
A Double Bottom Pattern indicates a trend reversal from bearish to a bullish bias. The initial price trend would be downwards.
The pattern appears like two distinctive valleys. Once the pattern is confirmed, the price breaks out from the peak formed between the two valleys. The figure below shows a double bottom pattern.
#3 Triple Bottom Pattern
Just like the Double Bottom pattern, a Triple Bottom Pattern is also a bullish reversal pattern, where the trend changes from bearish to a bullish bias. The initial price trend would be downwards.
The pattern appears like three distinctive valleys. But note that the price should not fall below the first bottom.
Once the pattern is confirmed, the price breaks out from the highest peak that is formed between the three valleys. The figure below shows a triple bottom pattern.
#4 Rounding Bottom Pattern
A Rounding Bottom Pattern is typically found on weekly charts. It foreshadows a trend reversal from bearish to a bullish bias. The initial price trend would be downwards.
The pattern appears like a rounded bowl. Once confirmed, price breaks out from the pattern’s highest peak (either right peak or left peak). The figure below shows a rounding bottom pattern.
Happy Trading!
Tara
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