Chart patterns & breakouts
Chart patterns are the crowd's handwriting over weeks — with clear lines that tell you when the story is confirmed or cancelled.
Analyst · 10 min · Updated 2026-11-08
💡 A pressure cooker
In a triangle or flag, price swings get smaller and smaller — like steam building in a pressure cooker with the lid on. When the whistle finally blows (the breakout), the release is often sharp. But the pattern does not tell you for sure which way the steam goes until it actually blows.
Reversal patterns
| Pattern | Shape | Confirmation | Measured target |
|---|---|---|---|
| Double top | Two similar highs with a dip between | Close below the dip low (the "neckline") | Height of pattern projected down from the neckline |
| Double bottom | Two similar lows with a rally between | Close above the neckline | Height projected up |
| Head & shoulders | Peak, higher peak, lower peak | Close below the neckline | Head-to-neckline distance projected down |
| Inverse H&S | Mirror image at a bottom | Close above the neckline | Projected up |
Continuation patterns
- Ascending triangle: flat resistance + rising lows — buyers pressing against a ceiling. Usually resolves upward, not always.
- Descending triangle: flat support + falling highs — sellers pressing on a floor.
- Symmetrical triangle: converging lines — compression with no bias until a break.
- Bull / bear flag: a sharp move (the pole) followed by a small, orderly counter-drift (the flag). Target ≈ pole length added from the breakout.
The rules that matter more than the shape
- No confirmation, no pattern. A double top is only a double top after the neckline breaks.
- Volume should rise on the breakout and fall during the pattern's formation.
- Measured targets are rough guides, not promises. Use the next major level as a sanity check.
- Know the failure point. If a breakout falls back inside the pattern, the pattern has failed — and failed patterns often move fast the other way.
Fibonacci retracements (a bonus tool)
After a strong swing, many traders watch the 38.2%, 50% and 61.8% retracement levels as possible pullback zones. They work partly because so many people watch them. Treat them like any other zone: useful when they line up with structure, meaningless alone.
🧮 Practical example: measuring a double bottom
Key takeaways
- Reversal: double tops/bottoms, head & shoulders.
- Continuation: triangles and flags.
- No neckline break = no pattern.
- Volume should confirm the breakout.
- Failed patterns are objective exit signals.
Education only — not financial advice.