Day Trading Chart Patterns 3

Question 1

In the context of a 'morning star' candlestick pattern, what does the middle candle represent?

Accepted Answer

Indecision and a potential shift in momentum

Answer

The middle candle of a morning star is a small-bodied doji or spinning top representing indecision and a potential turning point from sellers to buyers.

Question 2

Which chart pattern is characterized by two swing lows at approximately the same price level separated by a peak?

Accepted Answer

Double bottom

Answer

A double bottom consists of two consecutive lows at roughly the same price separated by an intermediate peak, signaling a potential bullish reversal.

Question 3

What distinguishes a 'flag' pattern from a 'pennant' pattern?

Accepted Answer

Flags have parallel trendlines; pennants have converging trendlines

Answer

Flags form with parallel trendlines (a rectangle-like channel), while pennants form with converging trendlines (a small triangle) after the flagpole move.

Question 4

In day trading, a 'three black crows' pattern signals what?

Accepted Answer

A strong bearish reversal or continuation of a downtrend

Answer

Three black crows consist of three consecutive long bearish candles, each opening within the prior body and closing lower, signaling strong bearish momentum.

Question 5

An 'ascending triangle' is considered bullish because of which structural feature?

Accepted Answer

The lower trendline slopes upward while the upper trendline is flat

Answer

An ascending triangle is bullish because higher lows (rising lower trendline) push against a flat resistance, indicating buyers are consistently entering at higher prices.

Day Trading Practice Test

Day Trading Practice Test

Day Trading Chart Patterns 3