What Is A Pattern?
A pattern is a chart formation that resembles a baseline with three peaks, the outside two are close in height and the middle is highest. In , a pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal. The pattern is believed to be one of the most reliable trend reversal patterns. It is one of several top patterns that signal, with varying degrees of accuracy, that an upward trend is nearing its end.
The pattern forms when a stock's price: Rises to a peak and subsequently declines back to the base of the prior up-move. Then, the price rises above the former peak to form the "nose" and then again declines back to the original base. Then finally, the stock price rises again, but to the level of the first, initial peak of the formation before declining back down to the base or neckline of chart patterns one more time.
A pattern is a chart formation that resembles a baseline with three peaks, the outside two are close in height and the middle is highest.
A pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal.
The pattern is believed to be one of the most reliable trend reversal patterns.
The chart pattern is popular and easy to spot pattern once a traders are aware of what they are watching for. The pattern appears on all times frames and can therefore be used by day and swing traders as well as investors. Entry levels, stop levels and price targets make the formation easy to implement, as the chart pattern provides important and easy-to-see levels.
Formation of the pattern:
Left shoulder: Price rise followed by a left price peak, followed by a decline.
Head: Price rise again forming a higher peak.
Right shoulder: A decline occurs once again, followed by a rise forming the right peak which is lower than the head.
What Does A Pattern Tell You?
A pattern is comprised of three component parts:
After long trends, the price rises to a peak and subsequently declines to form a trough.
The price rises again to form a second high substantially above the initial peak and declines again.
The price rises a third time, but only to the level of the first peak, before declining once more.
The first and third peaks are shoulders, and the second peak forms the head. The line connecting the first and second troughs is called the neckline.
patterns can also signal that a downward trend is about to reverse into an upward trend. In this case, the stocks price reaches three consecutive lows, separated by temporary rallies. Of these, the second trough is the lowest (the head) and the first and third are slightly shallower (the shoulders). The final rally after the third dip signals that the has reversed and prices are likely to keep moving up.