Reversal Patterns – Educational Piece

Money Making Reversal Patterns

This is a Follow Up Educational Piece from the last Educational Piece titled “Continuation Patterns” (found here). We will follow the same format as last week’s article in order to keep this article easily skimmable.

This article covers 7 key reversal patterns:

1. Double top

2. Double bottom

3. Triple top/bottom

4. Head and shoulders

5. Inverse head and shoulders

6. Rising wedge

7. Falling wedge

Double Top

Characteristics:

1. Bearish reversal pattern

2. Two tops of near equal highs are formed

How To Play It:

1. Breakdown point is a confirmed candle close below the neckline

2. Target is the distance from top to neckline that is measured from the breakdown point

3. Stop-loss is placed above the neckline

Double Bottom

Characteristics:

1. Bullish reversal pattern

2. Two bottoms of near equal lows are formed

How To Play It:

1. Breakout point is a confirmed candle close above the neckline

2. Target is the distance from bottom to neckline that is measured from the breakout point

3. Stop-loss is placed below the neckline

Triple Top/Bottom

This pattern follows the same principles as a double top or double bottom. The only difference is that there are 3 tops/bottoms instead of 2.

In the Premium Section next, we’ll cover head and shoulders, inverse head and shoulders, rising wedge, and falling wedge.

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