CHART PATTERN:

SUPPORT & RESISTANCE

HEAD AND SHOULDER

DOUBLE TOP AND BOTTOM

ROUNDING TOP AND BOTTOM

FLAG, WEDGES AND TRIANGLE

SUPPORT AND RESISTANCE:
Support and resistance represent key levels where a new trend could start or end. These form
good start points to dig out a trade.
WHAT IS SUPPORT?

A support is a horizontal floor where buyers are buying in full swing and sellers are
not interested to sell any more.

Support is a point where demand is more than supply. Support puts an end to a
further down trend.

Support exists at a point where bulls are more aggressive than bears. Bears pull back
and buying grey zone gets created. This region is called Support Zone.

Traders try to look for buy trades in support zone.

WHAT IS RESISTANCE?

A resistance is a horizontal ceiling where sellers are selling in full swing and buyers are
not interested to buy any more.

Resistance are points where supply is more than demand. Resistance ends further up
trend.

Resistance exists at a point where bears are more aggressive than bulls. Bulls pull back
and selling grey zone gets created. This region is called Resistance Zone.

Traders try to look for sell trades in resistance zone.

HEAD AND SHOULDER:

There are two type of Head and Shoulder (H&S) patterns.

1. H&S formed in Resistance zone (Top)

2. H&S formed in Support zone (Inverted/Bottom)

H&S formed in Resistance zone (Top)

A H&S (Top) is a reversal pattern which marks the end of the up trend. The H&S pattern is
also called as reversal chart pattern as the trend changes from uptrend to downtrend.
H&S formed in Resistance zone (Top)

H&S pattern consist of three parts:

1. Left shoulder
2. Head
3. Right shoulder

Neck line is formed at the support/bottom of 1, 2, 3 structures.

When the price goes below neck line after the Right shoulder formation, it results
into downtrend becoming our SELL level.

Now in this case Support acting as Neckline becomes Resistance going forward in
future.
H&S formed in Support zone:
A H&S (Bottom) is a bottom up pattern which marks the end of the down trend. The H&S pattern
is also called as reversal chart pattern as the trend changes from downtrend to uptrend.
H&S formed in Support zone:

Inverted H&S pattern consist of three parts:

1. Left shoulder
2. Head
3. Right shoulder

Neck line is formed at the resistance of 1, 2, 3 structures.

When the price goes above the neck line after the Right shoulder formation, it results
into an uptrend becoming our BUY level.

Now in this case Resistance acting as Neckline becomes Support going forward in future.
DOUBLE TOP:

Double Top marks an end of uptrend.

It looks like “M” shape.

Two tops are formed almost of same level where sellers are in full command.

The two peaks formed need not be equal in price, but should be same in the area with a
minor reaction low between them.

If the price falls below the support line or bottom line of “M” it’s called breakdown
resulting in downtrend.
DOUBLE BOTTOM:

Double Bottom marks an end of downtrend.

It looks like “W” shape.

Two bottoms are formed almost of same level where buyers are in full command.

The two peaks formed need not be equal in price, but should be same in the area with a
minor reaction high between them.

If the price rises above the resistance line or upper part of “W” it’s called breakout
resulting in uptrend.
Rounded top & BOTTOM:

Apart from double top and double bottom there is one more formation called as rounded top or
rounded bottom which also results into trend reversal.

This is commonly called as “U” shape pattern.

Bottom U or Inverted U shape pattern.

ROUNDED BOTTOM
Flag pattern:

The flag pattern looks similar to Flag. It has a Pole and a rectangle attached at the end of it.

The rectangle is formed by two parallel trend lines that act as support and resistance for
the price until the price breaks out.

In general, the flag will not be perfectly flat but will have its trend lines sloping.

There are 2 types of flag pattern.

1. Bearish Flag Pattern

2. Bullish Flag Pattern
Wedge Pattern:

Wedge: - There are two types of wedge.

Falling wedge:

Rising wedge:
Falling Wedge: - The falling wedge is a generally bullish pattern signaling that one will likely see
the price break upwards through the wedge and move into an uptrend. The trend lines of this
pattern converge, with both being slanted in a downward direction as the price is trading in a
downtrend.

Rising Wedge: - Conversely, a rising wedge is a bearish pattern that signals that the security is
likely to head in a downward direction. The trend lines of this pattern converge, with both being
slanted in an upward direction as the price is trading in an uptrend.