Wedge

  Wedge: The Wedge chart pattern can be either a continuation or reversal pattern. It is similar to a Symmetrical Triangle except that the Wedge Pattern slants in an upward or downward direction, while the symmetrical triangle generally shows a sideways movement. The other difference is that Wedges tend to form over longer periods, usually between three and six months. The fact that Wedges are classified as both continuation and reversal patterns, can make reading signals confusing. However, at the most basic level, a falling wedge in an uptrend is bullish and a rising wedge in a downtrend is considered bearish.

Flag and Pennant:

 Flag and Pennant: These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. The patterns are generally thought to last from one to three weeks (Can last from 1 to 12 week but ideally they should last between 1 and 4 weeks). They can appear both in up-trend and down-trend.

Triangles:

Triangles: Triangles are one of the most well-known chart patterns used in technical analysis. The three most common types of triangles, which vary in construction and implications, are Symmetrical Triangle, Ascending Triangle and Descending Triangle. These chart patterns are considered to last anywhere from a couple of weeks (ideally more than 12 weeks) to several months. These are areas of consolidations after a trending move and are generally continuation patterns, i.e. the erstwhile trends resumes after the breakout. However, in certain cases they act as reversal patterns. They can appear both in up-trend and down-trend.

Triple Tops and Bottoms:

Triple Tops and Bottoms: These are another set of reversal chart patterns in chart analysis. These are not as prevalent in charts as Head and Shoulders and Double Tops and Bottoms, but they act in a similar fashion. These two chart patterns are formed when the price movement tests a level of support or resistance three times and is unable to break through. They signal a reversal of the prior trend. A trade entry is initiated at the break of a neckline with a small stop-loss and the target is measured as the distance between peaks/troughs and the neckline.

Double Tops and Bottoms:

Double Tops and Bottoms: These chart patterns are well-known patterns that signal a trend reversal – these are considered to be one of the most reliable patterns and are commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. These patterns are created when price movement tests support or resistance levels twice and is unable to break through. These patterns are often used to signal intermediate and long-term trend reversals.

Head and Shoulder & Inverse Head & Shoulder:

 4.1: Head and Shoulder & Inverse Head & Shoulder:

 Head and Shoulder pattern is a bearish reversal pattern. This pattern appears after an uptrend. This pattern is formed with three consecutive tops with middle one being higher than the other two. The middle top is called the head and the two side peaks are called the shoulders. On joining the intermediate troughs, we get the neck-line. On ultimate break below the neckline, usually a short trade is taken with a stop-loss above the top of the nearest shoulder. The target is usually considered as the distance between the neckline and head, projected from the point of break. If the volume in the down leg of the right shoulder is on the higher side and break happens with high volume, the conviction is on the higher side for the reversal.

An Inverse Head and Shoulder is just mirror image of the Head and Shoulder pattern. This should appear after a sustained down trend, the rule of stop loss and target are similar. This often acts as a very effective bullish reversal pattern.

Volume

Volume: In this section we introduce the second aspect of charting. This is called volume. Traded volume is the number of quantity of stocks which change hand. The volume is shown as a sub graph in the price-time chart, below the price window. Higher the volume in any particular move, the greater is the conviction in that move to continue greater distance in that direction. However, if volume is on the lower side during a move, the stock is generally bound to lose momentum. Generally, during range bound phases, the volume is low. 

Trend	Volume	Interpretation
Up	High	Up trend may go greater distance
Up	Low	Lack of conviction/ participation in uptrend. Likely to retrace.
Down	High	Down move may cover greater distance
Down	Low	Less conviction in the down move, may reverse

 2.1: Market Trend and Range-Bound Consolidation: Often market movements happen in the form of trends. A price trend is a continuous or a directional price movement in upward or downward direction. We call them up -trend and down -trend respectively. Now if we look at price action in market through charts, we will find that no price movement happens in a straight line. Suppose we are looking at a broader uptrend represented as primary move, we may find intermediate corrections represented as secondary trend and minor counter moves among the secondary moves represented as minor trend. This is how the market behaves generally in both the up and the down trends. Market Trends Often an up- trend is represented in the form of a sequence of higher highs and higher lows. Similarly a downtrend is represented as a sequence of lower lows and lower highs. A trend is said to reverse when the sequence is broken. 

Candlestick Chart

1.3: Candlestick Chart: The concept of candlestick charts came from Japan. That is why they are often referred to as Japanese candlestick charts. These charts are the most versatile and popular form of chart representation. Price behavior during each time unit is represented in the form of a candle. If the closing price of a stock is higher than open price during a particular time period, then the candle is green, if the close price is below the open price then the candle is red. Each candle has a body and two wicks. The distance between open to close is represented by the body of a candle and the upper and lower wicks represent the highs and lows of a candle.

Bar charts

 1.2: Bar Charts: A bar chart is comprised of a series of bars. Every bar has four important price points - open close high and low. The bars are represented in green or blue color when close is higher than open and red color when close is lower than open. The bar charts are more detailed than the line chart and are good for demonstrating or spotting the classical price patterns. We will discuss about the classical chart patterns in appropriate time.

Line Charts

 1.1: Line Charts: In line chart each and every price point is represented as a dot. The X axis represents the time scale and the Y axis represents the price. Each dot or point represents the closing price at the end of a unit of time. These points are then joined to form a line. This is the simplest form of chart. But this is quite good if we want to plot 3-4 similarly priced stocks in a single chart and compare. Moreover, the line chart gives the clearest idea about price direction of a stock.