Hi trader, there are many winner stocks started with a good pattern. Chart pattern is a formation that creates a trading signal, and there are many patterns used by investors and traders all over the world. I would like to share my seven favorite stock patterns here, hope you like it.
1. Rectangle/ Flat Base:
Rectangle maybe is a common pattern but I think it’s strong enough to drive the stock to a new trend. The highs and lows of the company’s chart can be connected to form two parallel lines that make up the top and bottom of a rectangle.
the stock with this pattern is simply taking a break as it consolidates its trend and prepares to go higher or lower. It is a time when the stock is building up its power to propel its future movement. If the stock price break above the highs with high volume, it is the right time to buy the stock. And if the stock price cross below the lows, sell it or short it.
2. Inverse Head and Shoulders
This pattern is also known as “reverse head and shoulders” and “head and shoulders bottom.” Investopedia says this pattern is identified when the price action of a security meets the following characteristics:
1. The price falls to a trough and then rises.
2. The price falls below the former trough and then rises again.
3. Finally, the price falls again, but not as far as the second trough.
Look at the blue line on the chart. We can see that the first and third trough are considered shoulders, and the second peak forms the head. When the stock price break above the neckline (resistance) with high volume, it is the right time to buy the stock.
3. Cup with Handle/ Cup and Handle:
This pattern was developed by William O’Neil and I really like it. There are so many stocks break above this strong pattern with high volume then rise and go up. Cup with handle is also the most common pattern.
Those are good patterns and when you see stock with any of those pattern, I think you need to take the stock as your watchlist or even consider to buy it. But please check the general markets first before buying any stock. If the general markets go up, then your stock has a great possibility to go up too.
Disclosure: there is no stock mentioned on this article