Day Trading Chart Patterns 2

Question 1

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

Accepted Answer

A bullish continuation with a breakout above the handle

Answer

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

Question 2

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

Accepted Answer

A bearish reversal or breakdown

Answer

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

Question 3

Which volume characteristic confirms a valid symmetrical triangle breakout?

Accepted Answer

Volume spikes significantly on the breakout bar

Answer

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

Question 4

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

Accepted Answer

Just above the second peak

Answer

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

Question 5

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

Accepted Answer

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

Answer

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

Day Trading Practice Test