How to Read Stock Indices Patterns for Beginners

The common stock indices chart patterns used to trade stock indices that beginner stock indices trades should know are explained below. These stock indices chart pattern are grouped into reversal stock indices chart patterns and continuation stock indices trading patterns.

Reversal Trading Patterns

The commonly used stock indices reversal chart patterns are:

Double Tops

Double tops stock indices chart pattern is an M shaped 2 tops or 2 peaks pattern that forms on the stock indices price chart during a stock indices upwards trend.

Double tops stock indices pattern is a bearish stock indices pattern that forms when stock indices price reaches a resistance level.

The stock indices price will move upward & then dip slightly then turn up & move up to the top level where it had reached or slightly below this level then move downward again forming what is known as a double top stock indices trading chart pattern.

Double Bottoms

Double bottom stock indices chart pattern is a W shaped two bottoms or two lows stock indices pattern that forms on the stock indices price chart during a stock indices trading downwards trend.

Double bottom stock indices chart pattern is a bullish stock indices pattern that forms when stock indices price reaches a support level.

The stock indices price will move downward in then move upwards slightly then turn downward and move downward to the bottom level where it had reached or slightly above this level then move upwards again forming what is known as a double bottoms stock indices trading pattern.

Head & Shoulders Stock Indices Trading Chart Pattern

Head & Shoulders pattern is a bearish reversal stock indices chart pattern that forms after a stock indices upwards trend.

There is an initial peak which is the first shoulder then a slight dip in stock indices price, then a second higher peak which is the head then another stock indices price dip followed by the last peak in stock indices price which is the second shoulder.

The lowest points between the two stock indices price lows forms the neckline & the reversal stock indices signal from this head and shoulders pattern is confirmed once stock indices price moves below this neckline.

Reverse Head and Shoulders Chart Pattern

Reverse Head & Shoulders chart pattern is a bullish reversal stock indices chart pattern that forms after a stock indices trading downwards trend.

There's an initial dip which is the first inverse shoulder then a slight peak in stock indices price, then a second lower dip which is the reverse head then another stock indices price peak followed by the last stock indices price dip in stock indices price which is the second inverse shoulder.

The highest points between the two stock indices price peaks forms the neck-line & the reversal stock indices signal from this reverse head and shoulders pattern is confirmed once stock indices price moves above this neckline.

Continuation Stock Indices Trading Patterns

Continuation stock indices trading chart patterns are:

Rising Wedge or Ascending Wedge

Rising wedge is a continuation stock indices chart pattern that forms during an upwards stock indices trend & this stock indices patterns looks like a triangle stock indices consolidation pattern that has a rising slope that is heading upward.

Rising wedge chart pattern has rising sloping support and resistance levels and this stock indices pattern shows that stock indices prices keep moving higher & once stock indices prices move out of this rising wedge stock indices pattern the upward stock indices trend is likely to continue.

Falling Wedge or Descending Wedge

Falling wedge is a continuation stock indices chart pattern that forms during a downwards stock indices trend & this stock indices patterns looks like a triangle stock indices consolidation pattern that has a descending slope that is heading downward.

Falling wedge pattern has descending sloping support & resistance levels & this stock indices pattern shows that stock indices prices keep moving lower & once stock indices prices move out of this descending wedge stock indices pattern the downwards stock indices trend is likely to continue.

Bullish Pennant or Bearish Flag

Bullish Flag is a stock indices chart pattern with parallel support & resistance levels that forms during a stock indices upward trend and a stock indices continuation signal is generated when stock indices price moves above the bullish flag chart pattern & the upward stock indices trend continuation signal is generated by this continuation stock indices bullish flag pattern.

Bearish Pennant or Bearish Flag

Bearish Flag is a stock indices chart pattern with parallel support & resistance levels that forms during a stock indices downward trend and a stock indices continuation signal is generated when stock indices price moves below the bearish flag chart pattern & the downward stock indices trend continuation signal is generated by this continuation stock indices bearish flag pattern.

How to Read Stock Indices Trading Patterns for Beginner Traders