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Patterns in Technical Analysis. Symmetrical triangles. This pattern can be considered as a sign that the market is "uncertain" in which direction to move. Both buyers and sellers are pushing the price towards some middle value. As it happens the volume usually is decreasing as everybody is waiting for the price to break out of the triangle. The moment it happens, the volume is usually increasing - due to psychological reasons. It seems that the triangle USUALLY does not change the trend - if the price was going up, then it is most probable that it will break UP from the triangle and vice versa. Ascending triangles. This pattern is a variation of the Symmetrical triangle. Think of it in terms of "increasing pressure up and constant pressure down". The pattern will most probably be resolved UP. Descending triangles. This pattern is a variation of the Symmetrical triangle. Think of it in terms of "increasing pressure down and constant pressure up". The pattern will most probably be resolved DOWN. Head and shoulders. When the stock is going up, we can use the concept of a SUPPORT line, the line below the price, that price is constantly testing but cannot cross. Then when the trend is changing, the support line is broken AND for a short period of time the chart can be considered horizontal - the temporary support line is called a neckline. Then the price is trying to reach the previous support line (and to restore the trend) but failing (right shoulder). This is the first "sell" signal. The second one is happening when the right side of the right shoulder penetrates the neckline - this sell signal is much stronger. Again as always, a lot of this strength the pattern gets from the fact that people know about it, believe in it and when it happens - they begin selling, therefore pushing the price down. Wedges. Unlike with the triangles, both upper and lower edges are either going up (bearish formation) or down (boolish formation). Flags. Flags are (sort of) variations of a triangles. They can be explained using the same logic and they predict the same thing. The pattern is considered part of the trend, which means that on the uptrend it is a sign that price will continue to increase and on the downtrend it is a sign that the price will fall. Rectangles. Same as flags. A temporary slowdown in the trend that usually wouldn't change it.

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