Chart Patterns Flashcards

What does a 'cup and handle' pattern signal in day trading?

Answer: A bullish continuation with a breakout above the handle

The cup and handle is a bullish continuation pattern where price breaks out above the handle's resistance after forming a rounded cup base.

A 'rising wedge' pattern in an uptrend typically forecasts which outcome?

Answer: A bearish reversal or breakdown

A rising wedge in an uptrend is a bearish signal because converging trendlines show weakening buying pressure likely to result in a breakdown.

Which volume characteristic confirms a valid symmetrical triangle breakout?

Answer: Volume spikes significantly on the breakout bar

A valid symmetrical triangle breakout is confirmed by a significant volume surge on the breakout bar, indicating strong conviction.

In a 'double top' pattern, where is the traditional stop-loss placed for a short trade?

Answer: Just above the second peak

For a double top short trade, the stop-loss is placed just above the second peak because a move above it invalidates the pattern.

What is the measured move target for a head and shoulders pattern?

Answer: Distance from the head to the neckline, projected below the neckline

The measured move target equals the vertical distance from the head to the neckline, projected downward from the neckline breakout point.

A 'bullish engulfing' candlestick pattern is most reliable when it appears at what location?

Answer: At a key support level after a downtrend

A bullish engulfing pattern at a key support level after a downtrend has the highest reliability because it combines pattern and structure.

Which of the following best describes a 'pennant' chart pattern?

Answer: A short consolidation with converging trendlines after a sharp price move

A pennant is a brief consolidation pattern with converging trendlines that forms after a sharp flagpole move and signals continuation.