Day Trading Chart Patterns 5

Question 1

A 'falling wedge' in a downtrend is generally considered what type of signal?

Accepted Answer

Bullish reversal

Answer

A falling wedge in a downtrend is a bullish reversal pattern because converging downward trendlines show diminishing selling pressure before a breakout higher.

Question 2

What does the 'neckline' represent in a head and shoulders pattern?

Accepted Answer

The support level connecting the lows between the shoulders and head

Answer

The neckline connects the two reaction lows between the left shoulder, head, and right shoulder, and its break confirms the bearish reversal.

Question 3

In day trading, which candlestick pattern is known as a 'spinning top' and what does it suggest?

Accepted Answer

A candle with a small body and long equal upper and lower shadows, suggesting indecision

Answer

A spinning top has a small real body with long upper and lower shadows of roughly equal length, indicating indecision between buyers and sellers.

Question 4

What is the key difference between a 'reversal gap' and a 'continuation gap' (runaway gap)?

Accepted Answer

Reversal gaps occur at the start of a trend; continuation gaps occur mid-trend

Answer

Reversal (breakaway) gaps appear at the start of a new trend from consolidation, while continuation (runaway) gaps appear in the middle of an established trend.

Question 5

Which pattern forms when price makes lower highs and higher lows, converging toward an apex?

Accepted Answer

Symmetrical triangle

Answer

A symmetrical triangle features lower highs and higher lows converging to an apex, showing balanced pressure between buyers and sellers before a breakout.

Day Trading Practice Test

Day Trading Practice Test

Day Trading Chart Patterns 5