Chart Patterns: Triangles, Wedges & Head-and-Shoulders

Chart patterns are geometric shapes formed by price action that signal potential continuation or reversal of trends. They work because they reflect crowd psychology — the collective behavior of buyers and sellers creates recognizable formations with statistically predictable outcomes.

Patterns are classified as either continuation (price likely continues in the same direction) or reversal (price likely changes direction). Each pattern has a measured move target calculated from the pattern's dimensions.

Continuation Patterns

Bull Flag: Sharp rally (flagpole) followed by a slight downward-sloping consolidation (flag). Breakout above the flag = continuation. Target = flagpole length added to breakout point. One of the most reliable patterns in crypto.

Ascending Triangle: Flat resistance with rising support (higher lows). Buyers are increasingly aggressive. Breakout above resistance is the signal. Target = height of triangle.

Symmetrical Triangle: Converging trendlines with lower highs and higher lows. Compression before expansion. Usually breaks in the direction of the prior trend. Target = widest part of triangle.

Reversal Patterns

Head and Shoulders: Three peaks with the middle (head) highest. The neckline connects the two troughs. Break below neckline = bearish reversal. Target = head-to-neckline distance projected down from break. Inverse H&S is the bullish version.

Double Top/Bottom: Two peaks/troughs at approximately the same level. Shows price failed to break through twice. Break of the middle swing = confirmation. Target = pattern height.

Cup and Handle: U-shaped recovery (cup) followed by a small pullback (handle). Breakout above the cup's rim = bullish continuation. Common in crypto during accumulation phases.

Trading Patterns in Crypto

Crypto patterns tend to play out faster and more violently than in traditional markets due to 24/7 trading and higher volatility. Bull flags that take weeks in stocks may complete in days in crypto.

The most reliable crypto patterns: bull flags on the 4H/daily (70%+ success rate in uptrends), ascending triangles at all-time highs, and inverse head-and-shoulders at major bottoms. Always confirm with volume and wait for a candle close above/below the breakout level.