Three Trending Chart Patterns to Profit From

Eventually all trends change. If you are short at a market low you need to know when to cover and get out. Likewise if you are long at a market high, here too you need to know when to get out. That’s where “change in trend” chart patterns come into play; these predictable chart patterns give investors warning signs that a stock’s share price could be in for a reversal.

At in the world of technical analysis, there are essentially three basic chart patterns we look for when it comes to change in trends. Considering the fact that we are at one-year highs we’ll focus upon change in trends from up to down. Those three chart patterns are: Double Tops, Trendline breaks and First Thrusts Down. Below are examples of each…

Trending Chart Pattern #1: Double Tops

A Double Top is exactly what it sounds like: two short-term tops in a stock’s price. There are variations to this pattern though — one such variation is the shake out high, where an issue breaks above the prior high by a smidge and then rolls back over. The other variation is that of a continuation high, which is where a stock is further along in a correction then goes through a rally period much like a snap back rally then proceeds to put in a double top and reverses back to the downside.

Below is a recent example of a continuation double top that I shorted earlier in the year:

This too is rather self-explanatory in the sense that it’s simply all about a trendine break. That is, a retracement down that breaks below a stock’s trend line support level. Just remember bigger is better with this pattern — the bigger the pattern in time duration and scope the better. Just take a look at Trina Solar (NYSE: TSL) from January:


A first thrust down happens when a stock is in a clearly defined uptrend, then all of a sudden falls to either a prior support level or the 50-day moving average. That’s exactly what happened in the case below (the blue box is the first thrust down), then it proceeds to make a rally attempt — we call that rally attempt a snapback rally, by the way.

This article originally appeared on Penny Sleuth.