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Price Patterns

This document discusses various price patterns in financial markets including reversal patterns like head and shoulders and double tops/bottoms, as well as continuation patterns such as pennants, flags, wedges, triangles, and cups and handles. It also describes the volatility contraction pattern, which occurs during a period of consolidation when prices decrease in both volatility and volume. Methods for trading the volatility contraction pattern include buying near support levels, on pivots above moving averages with high volume, or on breakouts validated by above average volume.

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Ahmed Saeed Abdullah
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64 views

Price Patterns

This document discusses various price patterns in financial markets including reversal patterns like head and shoulders and double tops/bottoms, as well as continuation patterns such as pennants, flags, wedges, triangles, and cups and handles. It also describes the volatility contraction pattern, which occurs during a period of consolidation when prices decrease in both volatility and volume. Methods for trading the volatility contraction pattern include buying near support levels, on pivots above moving averages with high volume, or on breakouts validated by above average volume.

Uploaded by

Ahmed Saeed Abdullah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Price Patterns

Patterns

Price Patterns
Reversal Patterns

Examples of common reversal patterns include:


• Head and Shoulders, signaling two smaller price movements surrounding one larger
movement
• Double Tops, representing a short-term swing high, followed by a subsequent failed
attempt to break above the same resistance level
• Double Bottoms, showing a short-term swing low, followed by another failed attempt
to break below the same support level

Continuation Patterns
. Common continuation patterns include:
• Pennants, constructed using two converging trend lines
• Flags, drawn with two parallel trend lines
• Wedges, constructed with two converging trend lines, where both are angled either up
or down
• Triangles
• Cup and Handles
Patterns

Pennants

Flags

Wedges
Patterns

Triangles

Cup and Handles


Patterns

The Volatility Contraction Pattern


A Volatility Contraction Pattern is a specific chart pattern within a consolidation period.
When prices decrease in both volatility and volume, the price will form a contracted pattern

Trading Volatility Contraction Pattern


1. Buy on key support level near the bottom of the Bollinger band
One way to enter a Volatility Contraction Pattern is to buy near a support level as it bounces
from the bottom of the Bollinger band.

2. Buy on EMA9 pivot with above average volume


A second way to enter a Volatility Contraction Pattern is to buy as the price pivots above the
EMA9 line. This is considered a momentum shift that is made stronger when validated by an
increase in buying volume.
Patterns

3. Buy on breakout with above average volume


A third way to enter a Volatility Contraction Pattern is to buy as the price breaks out from a
key resistance level. A huge risk with this technique is if the volume cannot sustain the
breakout. When this happens, the price goes back to consolidation and you would have risked
buying at the top of a resistance area.

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