A 9AM Traders Academy initiative
Chart Patterns Explained
Seventeen stock chart patterns, each drawn out large with the key lines marked. Learn how to spot them, why they form, and how traders plan an entry, a stop and a target.
What a chart pattern is
A chart pattern is a recognisable shape that price draws on a chart over days, weeks or months. The shape exists because buyers and sellers keep making the same kinds of decisions around the same prices. Where they argue, you get a pause, a turn or a push.
Three ideas sit under every pattern. Support is a price where buyers have stepped in before. Resistance is a price where sellers have stepped in before. A breakout happens when price closes beyond one of those levels, and that is the moment most patterns are traded.
Reversal patterns
They show up after a trend has run for a while and suggest it may be ending. Head and shoulders, double tops and bottoms and the rounding bottom are the classics.
Continuation patterns
They show a pause inside a trend, and the move often resumes in the same direction. Flags, pennants, triangles and the cup and handle are the usual ones.
Looking for the smaller, single candle signals? Read our candlestick patterns guide.
Chart pattern cheat sheet
All seventeen at a glance. Targets are the usual measured moves, which are rough guides rather than promises.
| Pattern | Type | Usual bias | Typical target |
|---|---|---|---|
| Head and shoulders | Reversal | Bearish | Head to neckline distance, projected down |
| Inverse head and shoulders | Reversal | Bullish | Head to neckline distance, projected up |
| Double top | Reversal | Bearish | Pattern height, projected down |
| Double bottom | Reversal | Bullish | Pattern height, projected up |
| Triple top | Reversal | Bearish | Pattern height, projected down |
| Triple bottom | Reversal | Bullish | Pattern height, projected up |
| Rounding bottom | Reversal | Bullish | Bowl depth, added to the breakout |
| Bump and run reversal | Reversal | Bearish | Back to where the bump began |
| Ascending triangle | Continuation | Usually bullish | Widest part of the triangle, added to the breakout |
| Descending triangle | Continuation | Usually bearish | Widest part of the triangle, subtracted from the breakdown |
| Symmetrical triangle | Continuation | Either way | Widest part of the triangle, from the breakout |
| Rising wedge | Reversal or continuation | Usually bearish | Back to where the wedge started |
| Falling wedge | Reversal or continuation | Usually bullish | Back to where the wedge started |
| Flag | Continuation | Follows the pole | Pole height, added to the breakout |
| Pennant | Continuation | Follows the pole | Pole height, from the breakout |
| Cup and handle | Continuation | Bullish | Cup depth, added to the rim |
| Price channel | Trend | Follows the slope | Opposite channel line |
Reversal chart patterns
These shapes appear at the end of a trend and suggest control is changing hands.
Head and shoulders
Reversal | BearishHow to spot it
Three peaks with the middle one highest. The two outer peaks (the shoulders) sit at about the same height, and the dips between the peaks line up to form a neckline.
Why it forms
Buyers push to a fresh high at the head, then cannot repeat it on the right shoulder. Failing to make a higher high is the first sign demand is thinning.
How traders use it
Many traders sell, or exit longs, when a candle closes below the neckline. A common stop goes above the right shoulder. A common target is the head to neckline distance, projected down from the break.
Watch out for
Wait for the break. Plenty of head and shoulders shapes never finish, and a tilted neckline is fine. A close back above the neckline cancels the setup.
Inverse head and shoulders
Reversal | BullishHow to spot it
The same shape upside down. Three troughs with the middle one deepest, and a neckline drawn across the rallies between them.
Why it forms
Sellers push to a fresh low at the head, then cannot match it on the right shoulder. The last drop has run out of strength.
How traders use it
A close above the neckline, ideally on rising volume, is the usual buy signal. The stop goes below the right shoulder. The target is the head to neckline distance projected up.
Watch out for
A breakout on thin volume fails more often. Price also likes to retest the neckline before it moves, so give the trade some room.
Double top
Reversal | BearishHow to spot it
Two peaks at nearly the same price with a dip between them. The low of that dip is the neckline.
Why it forms
Buyers try twice to clear the same ceiling and fail both times. The second failure shows the ceiling is real.
How traders use it
Traders act on a close below the dip low. The stop sits above the two peaks, and the target is the height of the pattern projected down.
Watch out for
It is not a double top until the dip low breaks. Until then it is just a range, and price can still go either way.
Double bottom
Reversal | BullishHow to spot it
Two lows at about the same price with a rally between them. The high of that rally is the neckline.
Why it forms
Sellers push twice to the same floor and fail. Buyers defend it both times.
How traders use it
A close above the rally high is the usual signal. The stop goes below the two lows, and the target is the pattern height projected up.
Watch out for
The second low often comes on lighter volume than the first, which is a good sign. A break of the floor kills the idea.
Triple top
Reversal | BearishHow to spot it
Three peaks at about the same level, separated by two dips that bottom at similar prices.
Why it forms
Buyers hit the same ceiling three times and get turned away each time. Every failure leaves fewer of them.
How traders use it
Sell on a close below the lows of the two dips. The stop goes above the ceiling and the target is the pattern height projected down.
Watch out for
Rarer and slower than the double top, so it tends to be trusted more. Do not call it early after only two peaks.
Triple bottom
Reversal | BullishHow to spot it
Three lows at about the same price, with two rallies between them.
Why it forms
Sellers fail three times at the same floor, and buying interest builds with each test.
How traders use it
Buy on a close above the highs of the two rallies. The stop goes under the floor and the target is the pattern height projected up.
Watch out for
Long bases like this can come before big moves, but they test your patience. Do not call it early after only two lows.
Rounding bottom
Reversal | BullishHow to spot it
A slow, saucer-shaped turn from a downtrend into an uptrend. Price curves instead of spiking, and volume often fades into the low and then rises on the way up.
Why it forms
Selling fades gradually while buyers slowly take over, so control changes hands over weeks, not days.
How traders use it
Traders look for a break above the level where the bowl began, the left rim. The stop sits under the right side of the bowl and the target is the bowl depth added to the breakout.
Watch out for
These take weeks or months to form, so they suit longer timeframes. A flat, drifting market can look like a rounding bottom without ever turning.
Bump and run reversal
Reversal | BearishHow to spot it
A slow, gentle rise (the lead-in), then a steep climb (the bump) that is far faster than the lead-in, then a fall back through the lead-in trend line.
Why it forms
Hype and late buying drive the bump. Once the excitement fades, price drops back to where the normal trend was.
How traders use it
Draw the lead-in trend line. A close below it after the bump is the signal. The first target is usually near where the bump started.
Watch out for
The steeper the bump, the sharper the fall can be. Do not short the bump itself. Wait for the trend line to break.
Triangles and wedges
Price gets squeezed into a tighter and tighter range. The break tells you which side won.
Ascending triangle
Continuation | Usually bullishHow to spot it
A flat ceiling on top and a series of higher lows rising into it. Price keeps getting squeezed against the same level.
Why it forms
Sellers defend one price, but buyers keep paying more each time. Eventually the supply at the ceiling gets absorbed.
How traders use it
Traders buy a close above the flat resistance, ideally on higher volume. The stop sits under the last higher low and the target is the widest part of the triangle added to the breakout.
Watch out for
It usually breaks up, not always. A drop through the rising line turns it bearish. Retests of the breakout level are common.
Descending triangle
Continuation | Usually bearishHow to spot it
A flat floor with lower highs pressing down on it.
Why it forms
Buyers defend one price while sellers keep selling at lower levels, until the floor gives way.
How traders use it
Sell on a close below the flat support. The stop goes above the last lower high and the target is the widest part of the triangle subtracted from the breakdown.
Watch out for
It usually breaks down, but a push above the falling line turns it bullish. False breakdowns that snap back are common.
Symmetrical triangle
Continuation | Either wayHow to spot it
Lower highs and higher lows squeezing price toward a point, with neither side in control.
Why it forms
Buyers and sellers are both losing appetite for a fight, so the range tightens until one side gives.
How traders use it
Trade the break in either direction. Most traders want a close outside the lines, somewhere before the lines meet. The stop goes on the other side of the pattern and the target is the widest part.
Watch out for
Breaks very near the point where the lines meet are weak. Wait for a decisive candle, not a quick wick.
Rising wedge
Reversal or continuation | Usually bearishHow to spot it
Both lines slope up but they converge, so highs rise more slowly than lows. The range narrows while price creeps higher.
Why it forms
Buyers keep pushing up but with less force each time. Every new high is a weaker effort.
How traders use it
A close below the lower line is the signal. The stop goes above the last high and the usual target is where the wedge started.
Watch out for
In a downtrend, a rising wedge is a relief bounce that sellers tend to fade. Not every wedge breaks down, so wait for the line to fail.
Falling wedge
Reversal or continuation | Usually bullishHow to spot it
Both lines slope down but converge, so lows fall more slowly than highs.
Why it forms
Sellers keep pushing lower but with less force each time.
How traders use it
A close above the upper line is the signal. The stop goes below the last low and the target is the wedge starting point.
Watch out for
Volume often dries up inside the wedge and comes back on the break. A move lower negates the idea.
Continuation and trend patterns
The trend takes a breather and then, more often than not, carries on.
Flag
Continuation | Follows the poleHow to spot it
A sharp move (the pole), then a small tidy slope against the trend lasting a few candles, drawn as two parallel lines.
Why it forms
Traders who caught the move take some profit while others wait. The pause is the market catching its breath.
How traders use it
In a bullish flag, buy a close above the flag line. The stop goes below the flag low and the target is the pole height added to the breakout.
Watch out for
Good flags are short and shallow. A deep or very long drift behaves more like a reversal. A bearish flag is the same shape upside down.
Pennant
Continuation | Follows the poleHow to spot it
A sharp move, then a small symmetrical triangle with converging lines instead of parallel ones.
Why it forms
The same breather as a flag, but the range tightens as both sides wait.
How traders use it
Trade the break in the direction of the pole. The stop goes on the other side of the pennant and the target is the pole height measured from the breakout.
Watch out for
Pennants are small and quick. If one drags on, it behaves like a regular triangle and the usual rules for triangles apply.
Cup and handle
Continuation | BullishHow to spot it
A rounded, U-shaped base (the cup) followed by a short, shallow dip (the handle) just below the rim.
Why it forms
The cup is a slow handover from sellers to buyers. The handle shakes out nervous holders just before the move.
How traders use it
Buy a close above the rim, ideally on volume. The stop goes under the handle low and the target is the cup depth added to the rim.
Watch out for
Handles that fall past half the cup depth are weak. Cups with a sharp V-shaped bottom are less reliable than rounded ones.
Price channel
Trend | Follows the slopeHow to spot it
Price moving between two parallel lines that slope up, slope down or run flat. Highs and lows each touch their line several times.
Why it forms
Trends have a rhythm. Buyers step in near the lower line and sellers near the upper one.
How traders use it
In an uptrend, traders buy bounces off the lower line and take profit near the upper line. A close outside the channel signals a pause or a change in trend.
Watch out for
Trading against the slope is riskier. The more touches a line has, the more it matters, and a break of it is a warning.
A simple way to trade any pattern
The shapes change, but the routine does not.
- Find the trendZoom out first. Is price going up, down or sideways? That decides which patterns matter.
- Draw the linesMark the neckline, trend lines or channel using at least two or three touches each.
- Wait for the closeAct when a candle closes beyond the line, not when a wick pokes through it.
- Check participationA breakout with a surge in volume is more convincing than a quiet one.
- Plan the exitSet your stop and a rough target from the pattern height before you enter.
Five mistakes that cost traders money
- Trading the shape, not the breakA pattern is a story until price closes beyond the line. Acting early is the most common way to get caught.
- Ignoring the bigger trendA bullish pattern against a strong downtrend has a lower chance. Check the higher timeframe first.
- Forcing patterns that are not thereIf you have to squint or redraw the lines three times, skip it. Good patterns are obvious.
- Skipping the stopEvery pattern fails sometimes. The stop is where you find out you were wrong, at a size you can afford.
- Chasing a breakout that already ranIf price has moved most of the way to the target, the reward no longer justifies the risk. Wait for the next setup.
Chart pattern questions, answered
What is the difference between chart patterns and candlestick patterns?
Candlestick patterns are made of one to three candles and show a short-term tug of war. Chart patterns are bigger shapes drawn across many candles, often weeks of price action, and they show where a trend may pause, turn or continue. Traders often use the two together.
Which chart pattern is the most reliable?
No pattern is reliable on its own. Larger, cleaner patterns that took a long time to form, such as head and shoulders, double bottoms and cup and handle, usually get more respect than small ones. A breakout on strong volume also counts for more than one on thin volume.
How long does a chart pattern take to form?
It depends on the timeframe. On a daily chart, a flag may take a week or two and a head and shoulders may take a few months. The same shapes appear on intraday charts, only quicker. Longer patterns tend to lead to larger moves.
Do chart patterns work on intraday charts?
The shapes appear on every timeframe, but intraday charts have more noise, so false breakouts are more common. Many traders use a higher timeframe to find the bigger pattern and a lower one to time the entry.
How do I set a target from a chart pattern?
Most patterns use a measured move. Measure the height of the pattern at its widest point, then add it to the breakout point for a bullish pattern or subtract it for a bearish one. Treat it as a rough guide, not a promise, and take profit in stages if you prefer.
Learn to read charts with a mentor
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Published by 9AM Traders Academy as a free learning initiative. Diagrams are illustrations, not real price data. This page is for education only and is not investment advice. Trading involves risk, and past patterns do not guarantee future results.