A PPENDIX

Visual Appendix of Chart Patterns

Broadening Bottoms Broadening Tops
Price trends upward into a
megaphone-shaped pattern
Price trends downward into with higher highs and lower
a megaphone-shaped pattern lows. Five point reversals
with higher highs and lower have three peaks and two
lows. troughs.

Broadening Formations, Right-Angled and Broadening Wedges, Ascending

Ascending
Looks like a megaphone Looks like a megaphone,
with a horizontal bottom and tilted up, with price action
bounded on the top by an that outlines two up-sloping
up-sloping trendline. Price and diverging trendlines.
can enter the pattern from Price can enter the pattern
any direction. from any direction.

Broadening Wedges, Descending

Broadening Formations, Right-Angled and
Descending Looks like a megaphone, tilted
down, with price action that
Looks like a megaphone,
outlines two down-sloping
tilted down, with the top
and diverging trendlines. Price
horizontal and bounded
can enter the pattern from any
on the bottom by a down-
direction.
sloping trendline. Price can
enter the pattern from any
direction.

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 Bump-and-Run Reversal Dead-Cat Bounce, Inverted
Looks like a frying pan with the
handle on the left sloping downward
Bottoms Price rises from 5 to 20 per-
cent (or more) in one session
to the pan. Price drops into the pan followed by a gradual decline.
base, levels out, and eventually soars
out the right side. Price can enter the
pattern from any direction.
Diamond Bottoms Price trends down into a pattern that
begins with higher highs and lower
lows (broadening shape) followed by
Bump-and-Run Reversal Tops lower highs and higher lows (converg-
Price can enter the pattern ing shape).
from any direction. A trendline
connecting the lows in a nar-
row trading range rises steadi- Diamond Tops
ly then bumps up, rounds over, Price trends upward into a pattern
and breaks out downward. that begins with higher highs and
lower lows (broadening shape) fol-
Cup with Handle lowed by lower highs and higher lows
(converging shape).

Price rises at least 30 percent

going into the left cup lip,
forms a cup, with the handle Double Bottoms, Adam Price trends downward leading to two
on the right. & Adam valleys that bottom near the same
price. An Adam bottom is narrow
and often a one-day price spike. Eve
bottoms are wide and more rounded
Cup with Handle, Inverted looking. If they have spikes, they are
short and numerous.
A A
Look for a smooth, rounded,
and inverted cup, but ac- Double Bottoms, Adam & Eve
cept deviations, followed by
a handle on the right and a
downward breakout.

A E
Dead-Cat Bounce
Price drops from 15 to 70 per- Double Bottoms, Eve & Adam
cent (or more) in one session,
bounces, but then continues
lower.

E A

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 Double Bottoms, Eve & Eve Flags, High and Tight
Price doubles (or nearly so) in two
months or less and then consolidates.
The “flag” portion of the high and tight
flag usually isn’t a flag at all, but a
Price trends upward
E E congestion region.
leading to two peaks
that top out near the
Double Tops, Adam & Adam
same price. An Adam
A A top is narrow and often Gaps The day’s low price is above the next
a one-day price spike. day’s high (bearish gap) or the day’s
Eve tops are wide and high is below the next day’s low (bull-
more rounded looking. ish gap), leaving a space on the chart.
If they have spikes, G
The gap closes when the stock retraces
they are short and the price showing the gap.
Double Tops, Adam & Eve numerous.
A E Head-and-Shoulders Bottoms
Price trends downward into a three-
valley pattern with the center valley
below the other two. It looks like a
person’s bust flipped upside down. The
Double Tops, Eve & Adam two shoulders should appear well de-
E A LS
fined and symmetrical about the head
RS in price and distance.
H

Head-and-Shoulders Bottoms, Complex

Double Tops, Eve & Eve Price trends downward into a head-
and-shoulders bottom with multiple
E E
shoulders, multiple heads, or (rarely)
S S both. The head is lower than the
S S shoulders but generally not by much. A
H neckline connecting the peaks is often
nearly horizontal.
Flags Head-and-Shoulders Tops
H
LS RS
After an upward price trend, the pat-
Flags show price action bounded by tern appears as three peaks, the center
two parallel (or nearly so) trendlines one is the tallest, resembling a person’s
and are less than three weeks long. The bust. The two shoulders should appear
flag must sit atop a flagpole, which is a well defined and symmetrical about the
straight-line (or nearly so) price run. head in price and distance.

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 Head-and-Shoulders Tops, Complex Islands, Long
Price trends upward into a head- Two gaps do not share the same price,
H H
and-shoulders top with multiple S leaving an island behind on the chart.
S
shoulders or multiple heads. The Price can trend in any direction leading
head is higher than the shoulders G to the island.
but generally not by very much. A
neckline connecting the valleys is
often nearly horizontal. G
Horn Bottoms

Use weekly charts to find two

Measured Move Down
downward price spikes separated
by a week in a downtrend. The
two spikes should be longer than Usually begins from a new high, price
others and be well below the cen- H H declines rapidly in a straight-line fash-
ter week. The pattern should look ion, pauses in the middle, and then
like an inverted horn. Horn Tops resumes the second leg down.
H H
Measured Move Up
In an up trend on the weekly chart,
find two upward price spikes sepa-
rated by a week. The two spikes
Often after trending downward for
should be longer than similar
weeks, price rises in a straight-line
spikes and tower above the center
week. It should look like a horn. Island Reversals, Bottoms run, pauses in the middle, and then
forms a second straight-line run.

G G
Pennants
After price trends down, two gaps
share all or part of the same price,
leaving a small price island behind. Two converting trendlines surround
price action forming a pennant less than
Island Reversals, Tops three weeks long. A flagpole (straight-
line price run) must accompany the
pennant. Price in the pennant usually
After price trends upward, two gaps G G tilts against the prevailing trend.
share all or part of the same price,
leaving a small price island behind. Pipe Bottoms

After trending down, price on the

weekly chart forms two downward and
adjacent price spikes that drop well
P P below the two surrounding weeks.

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 Pipe Tops On the weekly chart, after price trends Scallops, Descending Price trends downward to the scallop
higher, two tall and adjacent price and forms a reverse J with prices much
P P
spikes tower above the two surround- higher on the left than on the right. The
ing weeks. bowl should be a rounded turn.

Rectangle Bottoms Price trends downward into a

Scallops, Descending and Inverted
rectangle that forms between
two horizontal (or nearly so) Price moves up and then rounds over
trendlines with price touching at the top and tumbles, forming an
each trendline at least twice. inverted J shape with the right valley
below the left.
Three Falling Peaks
Rectangle Tops 1
Price trends upward into a rectangle 2
that forms between two horizontal (or 3
Price forms three consecu-
nearly so) trendlines with price touch- tively lower peaks, with each
ing each trendline at least twice. peak looking similar.

Three Rising Valleys

Rounding Bottoms
Price curves gently, forming
a rounded bowl, usually over Price forms three consecu-
many months and usually tively higher valleys with each
3
after an upward price trend. 2 valley looking similar.
1

Rounding Tops Triangles, Ascending

Price trends upward into
this pattern and curves over, Price follows two converging trend-
often taking several weeks, lines, the top one horizontal and the
forming a dome (an inverted bottom one sloping up, form a triangle
bowl shape). pattern. Price can enter and exit the
pattern in any direction.

Scallops, Ascending
Two price peaks form a rounded re- Triangles, Descending
cession in between and higher right
peak. Looks like a large letter J. Price makes a triangular-shaped pattern
bounded by two converging trendlines,
the bottom one horizontal and the top
Scallops, Ascending and Inverted one sloping down. Price can enter and
exit the pattern in any direction.
Price trends upward then rounds
over at the top, forming an inverted
and backward J.

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 Triangles, Symmetrical Wedges, Falling
Price forms lower peaks and Price follows two converging
higher valleys following two and down-sloping trendlines
converging trendlines. Price at least three weeks long.
can enter and exit the pat-
tern in any direction.

Wedges, Rising
Price trends downward Triple Bottoms Price forms higher peaks and
forming three valleys, well higher valleys following two
separated and distinct, near converging trendlines that
the same price. The bottoms both slope upward.
are usually large, and the rise
between them often appears
TB TB TB
rounded but need not be.
Triple Tops
TT TT TT
After an up trend, price
forms three well-separated
and distinct peaks near the
same price. The tall peaks
are often sharp spikes that
contrast with more rounded-
appearing valleys.

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