1. CHANNELS

 

When prices trend between two parallel trendlines they form a channel. When prices hit the bottom trendline, this may be used as a buying area and when prices hit the upper trandline, this may be used as a profit taking area and vice versa.

 

Breakouts of trendlines and support and resistance lines provide good areas for buying and selling. Channels can be upward or downward sloping and horizontal.

 

 

2. RECTANGLES

 

Rectangle - bullish in an up trend. When the market is flat, draw a line through the highs and a line through the lows. Buy when the market closes above the straddle. Sometimes, there will be a bull trap and the market will break back into the rectangle and below the support line.

 

 

Rectangle - bearish in an down trend. Sell when price breaks below support and closes below support.

 

 

3. TRIANGLES

 

Ascending Triangle in an up trend - bullish. A formation in which the slope of price highs and the slope of price lows are converging to a point. The resistance line is parallel to the bottom edge of the chart while the support line is upward sloping. Place a buy order in a break up and out of the triangle. However, if the pattern fails, sell when the market breaks out and below the triangle.

 

 

Descending triangle in a downtrend - bearish. The defining characteristic of a descending right angle triangles is the pattern of declining highs and a series of equal lows. This combination of points can be connected to form a right angle triangle. The hypotenuse should be sloping from higher to lower and left to right. An illusory double bottom invites one last batch of weak hands to buy before a sharp break signals major selling. Sell when price braks out and down. Descending triangles are one of the most reliable technical patterns because both supply and demand are easily defined.

 

 

4. SYMMETRICAL TRIANGLES

 

Symmetrical triangle in an up trend - bullish. A symmetrical triangle is a formation in which the slope of price highs and lows are converging to a point. Support and resistance are sloping. Symmetrical triangles are formed by rallies and sell-offs, each smaller than the last. As time moves on, an event is inminent. The move will be explosive. Place a buy order on a break up and out of the triangle but the price could go in the opposite direction.

 

 

Symmetrical triangle in a downtrend - bearish. Place a sell order on a breakout below the triangle.

 

 

5. FLAGS

 

Bull flag in a up trend - bullish. Bull flags are characterizez by lower highs and lower lows with pattern slanting against the trend. Their trendlines run parallel.

 

 

Bear flag in a down trend - bearish. Bear flags have higher high and higher lows and slope against the trend. Their trendlines run parallel. Flags are tipically seen right after a big, quick move.

 

 

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