Reversal Chart Patterns

Reversal patterns are large chart formation that signal the end of a long-term trend. Unlike a single candlestick which predicts 1-2 days, these patterns predict the trend for weeks or months.

Head and Shoulders (Top)

The "King" of reversal patterns. It signifies that buyers are losing steam.

The Structure:

1. Left Shoulder: A rally to a peak, followed by a dip.
2. Head: A higher rally (buyers push hard), followed by a dip.
3. Right Shoulder: A failed rally. Buyers try again but can't even reach the previous high. This is the sign of weakness.
4. Neckline: The support line connecting the bottom of the two dips.

The Trade:

• Signal: Short Sell when price breaks closely below the Neckline.
• Target: Measure distance from Head to Neckline. Subtract that from the breakdown point.
• Stop Loss: Above the Right Shoulder.

Inverse Head and Shoulders (Bottom)

The exact opposite. Found at the bottom of a downtrend. Signal: Buy when price breaks above the Neckline.

Double Top ("M" Pattern)

Buyers push price to a resistance level twice and fail both times.

• Psychology: "We tried twice to break ₹500. We can't do it. Time to sell."
• Confirmation: You MUST wait for the price to break the "Valley" (Support) between the two peaks. Selling at the second peak is aggressive; moving below the support is confirmed.

Double Bottom ("W" Pattern)

Sellers push price to a support level twice and fail.

• Psychology: "We can't push it below ₹200. Cheap buyers are stepping in."
• Target: The height of the "W" pattern added to the breakout point.

The Diamond Top

A rare, complex, and violent reversal pattern often found at market peaks (like Bitcoin tops).

• Expansion (Broadening wedge) followed by Contraction (Symmetrical triangle).
• Looks like a Diamond.
• Signals mass confusion followed by a breakdown.