CHART PATTERNS

CHART PATTERNS

In financial market, the force of buyers and sellers creates a unique formation of
price patterns in the charts. These chart price patterns, if understand correctly

gives meaningful buy signal or sell signal. These chart patterns classified as 

continuous  patterns and reversal patterns. Below we present numerous 

Indian stock market chart patterns.

Continuous chart patterns.
Continuous chart patterns means if you found the particular chart pattern in the 

chart, the price tend to continue the trend. Common continuous chart patterns 

are ascending triangle, flags, pennants, running triangle etc.
Reversal chart patterns
The reversal chart patterns means if your found the reversal chart pattern 

in the chart, the price tend to reverse the trend. Common reversal chart 

patterns are head and shoulders, round bottom, double top, double bottom, 

triple top, triple bottom etc

Ascending triangle
Ascending triangle pattern formed by sellers sell the stock at constant prices, 

buyers buy the stock by higher and higher prices. If  the market sentiment 

turns bullish, buyers buy all quantity offered by the sellers. We may call it 

bullish consolidation. Generally it is considered as continuation pattern.
Below the chart image of TATAPOWER showing the ascending triangle.

Bull Flag
Flags considered as continuation pattern. Normally it is found in bull stage

and bear stage. Sellers sell the stock at lower and lower prices; buyers 

buy the stock at lower and lower prices. At the end of pattern the

positive fundamental or the positive market sentiment drive the 

buyers to buy the price at higher prices.
Below the image of  UNITECH showing the bull flag chart pattern.

Bullish Pennants
Pennants are most reliable continuation pattern. It rarely produces the trend 

reverse result. These are the temporary halting area in the continuous up 

trend or the downtrend of the script. It is much like the flag. Here the 

buyer’s trend line slopes upward towards the seller’s trend line.
The image below is SESAGOA  showing the pennant chart pattern.

Cup with handle
It is a chart pattern found in the stock market resembling the cup with handle. 

The bottom formed by the negative sentiment in the market. Then the 

positive fundamentals of the scripts drive the buyers to buy at 

the bottom. Generally it is considered as the continuation pattern found 

in the bull stage and bear stage.
Below the image of BEL in Indian stock market showing cup with handle pattern.

Symmetrical triangles
Symmetrical triangle is a continuous chart pattern found in bull stage and 
bear stages of the market. It is easily recognizable with clear shape. 
The seller sells the script at lower  and lower prices. The buyers buy 
the script at higher and higher prices. Due to these two forces gives the
symmetrical triangle shape to chart. If the market sentiment turns to 
positive the buyers will get the edge and drive the prices to breakout
the seller’s trend line.
The chart image of BEL is given below with symmetrical triangle chart pattern.

Bear flags
Flags considered as continuation pattern. Normally it is found in bull 

stage and bear stage. Sellers sell the stock at higher and higher 

prices; buyers buy the stock at higher and higher prices. At 

the end of pattern the negative fundamental or the negative market 

sentiment drive the seller to sell the price at lower prices
The image below is HDIL  in Indian stock market showing the bear

flag chart pattern.

Bearish pennants
Pennants are most reliable continuation pattern. It rarely produces

the trend reverse result. These are the temporary halting area in the 

continuous up trend or the downtrend of the stock. It is much like 

the flag. Here the sellers’ trend line slopes downward towards the buyers’ 

trend line.
The image below is HDIL  in Indian stock market showing the bearish 

pennants.

Descending triangles
Descending triangle pattern formed by buyers buy the stock at 

constant prices, sellers sell the stock by lower and lower prices. 

Or the market sentiment turns bearish. We may call it bearish 

consolidation. Generally it is considered as continuation pattern.

But here below the descending triangle pattern of wockhardt pharma

is reversal pattern
Below the chart image of WOCKHARDT PHARMA in Indian stock market 

showing the descending triangle pattern.

Wedge pattern
Wedge pattern in stock prices formed by two converging trend

lines both formed by the sellers and buyers. The wedge may be 

rising in nature or falling in nature. It is commonly found in the

bull market and bear market. The interpretation of wedge is 

complicated as the resultant price movement may go either 

direction. It is looks like the pennant and resemble like the flags.
Below the chart image of VSNL showing the rising wedge pattern.

The reliability of chart patterns vary widely depends on the
chart patterns. Some chart patterns give more reliability than
the others. We should not totally depend on the chart patterns
alone. If you found the chart pattern correctly then other you
own indicators give the positive signal in confirmation with the
chart pattern you can take buy or sell.

The author MAHENDRAVARMAN.MA, is one among the technical anlaysts, and  the head

of the risk management team in traderangers.com. As a trader and technical 

analyst he has wide experience in Forex market and indian stock market.