The previous post had discussed about some types of reversal stock patterns. This concluding post of the series will look at a few more types of reversal patterns. Please note that the screen shots may not perfectly reflect the definition of that pattern, which a trader performing technical analysis would look for and accept and only meant to provide some visual idea instead of mere text (click on images for enlarged views).
Reversal Type Patterns (continued)
An ascending wedge pattern can be seen during an uptrend or a downtrend. When found during a downtrend, the ascending wedge is similar to a bear flag pattern indicating a continuation of the trend. However, when witnessed during a uptrend, the ascending wedge is a reversal indicator. The ascending wedge has a narrowing price range and increasing volume signals a breakout as the support is broken.
A descending wedge pattern can be seen during an uptrend or a downtrend. When found during an uptrend, the descending wedge pattern resembles a bull pennant indicating a continuation of the trend. However, when witnessed during a downtrend, the descending wedge is a reversal indicator. The descending wedge has a narrowing price range and expanding volume signals a breakout.
Triple top is a reversal pattern, generally found during an uptrend. The price chart shows three peaks, which may or may not be at the same price, with a few lows between them. A failure to attain another high followed by a downside breakout confirms the triple top pattern that is usually accompanied by increasing volume.
Triple bottom is a reversal pattern, generally found during a downtrend. The price chart shows three lows, which may or may not be at the same price, interspersed with a few highs. A failure to attain another low followed by an upside breakout confirms the triple bottom pattern that is usually accompanied by expanding volume.
A rounded bottom pattern is found during a downtrend. Rarely seen, it may take several months for the pattern to emerge. The lows over several weeks or months form the rounded bottom while the highs act as the resistance. A breakout from the top indicates a reversal, usually characterized by high volume trades.
These last four posts about chart patterns are only meant to provide a starting point for someone interested in technical analysis to delve further into the topic. Please do your due diligence (as always) before deciding to grow your investment using technical analysis.
About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. You can read his other articles here.
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