Trade Stock Indices

The 4 Reversal Indices Setup Patterns on Indices Trade Described with Examples

Reversal Setups show when the market trend changes once this reversal Stock Index Trade chart pattern setup has been verified.

Reversal stock index trading patterns are generally formed after prolonged upward or downward price movements. These patterns indicate an imminent market trend reversal.

1. Reversal Indices Setup Patterns

  • Double Tops Reversal Patterns
  • Double Bottom Reversal Setups Patterns
  • Head & Shoulders Reversal Setup Patterns
  • Reverse Head and Shoulders Reversal Patterns

Double Top

Double tops pattern setup represents a reversal chart configuration that emerges after a prolonged upward trend. This pattern consists of two consecutive peaks of nearly the same height, separated by a moderate trough.

Summary:

  • Double tops setup forms after an extended move upward
  • Double tops chart pattern setup shows that there will be a reversal in market
  • We sell when price breaks below the neck-line point: see below for an explanation.

Explanation of Double Tops Setup on a Chart - What Does Reversal Pattern Mean?

Example of Double Tops Reversal Pattern on a Trade Chart

Double Bottom

Double bottoms pattern setup is a reversal trading pattern setup which forms after an extended downward trend. It is made up of 2 consecutive troughs which are roughly equal, with a moderate peak in between.

Summary:

  • Double bottoms chart pattern forms after an extended move downward
  • Double bottom chart pattern setup shows that there will be a reversal in market
  • We buy when the price breaks above the neck-line point: see below for an explanation.

Explanation of Double Bottom Pattern on a Chart - What Does Reversal Setup Mean?

Example of Double Bottoms Reversal Setup on a Trade Chart

Head Shoulders Chart Setup

The Head and Shoulders chart formation is a pattern signaling a potential trend reversal, which manifests following a prolonged upward trajectory. It consists of three sequential high points: the left shoulder, the head, and the right shoulder, separated by two minor troughs between the shoulder peaks.

Summary:

  • Head Shoulders trading pattern setup forms after an extended move upward
  • Head Shoulders chart pattern setup shows that there will be a reversal in market
  • Head Shoulders chart pattern formation resembles head with shoulders thus its title.
  • To draw the neck line we use chart point 1 and point 2 just as is displayed and shown below. We also extend the line in both directions.
  • We sell when price breaks below the neck-line point: see the trading chart below for an explanation.

Explanation of Head Shoulders Reversal Setup on a Chart - Definition of Reversal Patterns

Example of Head & Shoulders Reversal Setup on a Trade Chart

Reverse Head Shoulders Chart Setup

The reverse head and shoulders setup signals a reversal. It forms after a long downtrend in stock indices. The shape looks like an upside-down head and shoulders.

Summary:

  • Reverse Head Shoulders chart pattern forms after an extended move downwards
  • Reverse Head Shoulders chart pattern setup shows that there will be a reversal in market
  • Reverse Head Shoulders chart pattern formation resembles is up side down, therefore the name Reverse.
  • We buy when price breaks above the neck-line point: see the chart below for an explanation.

Reverse Head & Shoulders Setup in Indices Trade - Definition of Reversal Patterns

Example of Reverse/Inverse Head and Shoulders Reversal Setup on a Trade Chart

Reversal Indices Setup Patterns Lessons Tutorials

Double Tops Patterns & Double Bottoms Setup Patterns

Head and shoulders Setup Pattern Patterns & Reverse/Inverse Head and Shoulders Setup Patterns

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