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Bullish Patterns
Symmetrical Triangles
Ascending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Bottom
Cup & Handle
Trendlines

Neutral Patterns
Symmetrical Triangles
Rectangles

Bearish Patterns
Symmetrical Triangles
Descending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Top
Trendlines

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Trendlines

We classify trendlines as being either continuation patterns or reversal patterns.

Small trendlines that form within a downtrend are continuation patterns that definitely have a bearish bias. Although the stock may not fit the bearish flag, pennant, or wedge patterns, it still remains a weak stock in a downtrend that is temporarily “resting” before it most likely plunges again. These trendlines shall be played the same as the continuation patterns previously discussed. This is to say a volume surge is not required on the break because a delayed volume surge is preferable, and the pricing action after the break should mirror the move into the pattern.

Bearish trendlines also appear after a stock has had a big rally and tops out. A large pattern indicates many stock holders would be showing a loss if the stock traded below support, and these stockholders would create much of the downside selling pressure. Breaks to the downside do not have a volume requirement. As with other bearish breaks, often there is a delayed volume surge.




Don't be fooled here – not all trendline breaks work this well. But it does go to show you what can happen. When PCS traded below the June low, every single trader/investor who bought the stock in the previous 9 months was showing a loss. As the stock dropped and more and more stockholders became frustrated, fear turned to panic and the stock completely collapsed when everyone tried to run for the exit.



ARW was in a steady downtrend and then traded sideways with resistance established at 15. The pattern trading action didn't exactly fit any of our “canned” patterns discussed in this section, but it was still playable when support was taken out…just a simple continuation pattern.



EXTR formed a large pattern that neutralized whatever downside momentum existed when the stock finally started trading sideways in March. The stock could have broken either way, but in this case, once support was taken out, volume ramped up and the stock continued its move down.



WBSN was in a steady downtrend when it paused at this trendline that fell into the “continuation” category. Once support was broken, volume picked up, and the stock continued its move down.


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