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Chart Patterns are naturally occurring patterns that typically repeat over a period of time. These patterns play a significant role in technical analysis. For proponents, the theory is that by studying repeating patterns, a trader will be able to anticipate future price movements. Opponents of the theory believe that "past performance does not guarantee future results".
Examples of Classical Chart Patterns:
- Head and Shoulders
- Cup and Handle
- Double Top and Double Bottom
- Triple Top and Triple Bottom
- Broadening Top
Broadening tops are a bearish pattern. The pattern is formed by a series of five consecutive small reversals followed by a substantial decline.
- Flag and Pennant