The 4 Reversal Stock Indices Setup Patterns in Indices Trading Explained with Examples
Reversal Chart Patterns confirm the reversal of the market trend once this reversal Indices Trading chart pattern setup is confirmed.
These reversal Indices Trading patterns are formed after extended price trend either upwards or downward & these reversal chart patterns signal that the market trend is about to reverse.
1. Reversal Stock Indices Setup Patterns
- Double Tops Reversal Patterns
- Double Bottom Reversal Chart Setups
- Head & Shoulders Reversal Setup Patterns
- Reverse Head & Shoulders Reversal Patterns
Double Top
Double tops pattern setup is a reversal chart pattern setup which forms after an extended upwards trend. As its name implies, this pattern is made up of two consecutive peaks which are roughly equal, with a moderate trough in between.
Summary:
- Double tops setup forms after an extended move upward
- Double tops chart pattern setup formation shows that there'll be a reversal in market
- We sell when price breaks below the neck line point: see below for explanation.
Example of Double Tops Reversal Pattern on a Trading Chart
Double Bottom
Double bottoms pattern setup is a reversal pattern setup which forms after an extended downward trend. It is made up of two consecutive troughs which are roughly equal, with a moderate peak in between.
Summary:
- Double bottoms chart pattern forms after an extended move downwards
- Double bottom chart pattern setup formation shows that there'll be a reversal in market
- We buy when the price breaks above the neck line point: see below for explanation.
Example of Double Bottoms Reversal Chart Pattern on a Trading Chart
Head & Shoulders Pattern
Head and Shoulders pattern setup is a reversal pattern setup which forms after an extended upwards trend. It is made up of three consecutive peaks, the left shoulder, head and the right shoulder with two moderate troughs between the shoulders.
Summary:
- Head and Shoulders trading pattern setup forms after an extended move upward
- Head & Shoulders chart pattern setup formation shows that there'll be a reversal in market
- Head & Shoulders chart pattern formation resembles head with shoulders thus its name.
- To draw the neck line we use chart point 1 and point 2 as displayed below. We also extend this line in both directions.
- We sell when the price breaks below the neck line point: see the chart below for explanation.
Example of Head and Shoulders Reversal Chart Pattern on a Trading Chart
Reverse Head & Shoulders Pattern
Reverse Head & Shoulders pattern setup is a reversal head and shoulders pattern setup which forms after an extended Indices Trading downward trend. It resembles an up-side down head shoulders.
Summary:
- Reverse Head & Shoulders chart pattern forms after an extended move downwards
- Reverse Head & Shoulders chart pattern setup formation shows that there'll be a reversal in market
- Reverse Head & Shoulders chart pattern formation resembles is upside-down, therefore the name Reverse.
- We buy when price breaks above the neck line point: see the chart below for explanation.
Example of Reverse Head and Shoulders Reversal Chart Pattern on a Trading Chart
Reversal Stock Indices Setup Patterns Lessons
Double Tops Patterns & Double Bottoms Setup Patterns
Head and shoulders Chart Setup Patterns and Reverse Head & Shoulders Setup Patterns
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