Crypto chart patterns provide insight into market sentiment but may be subjective, so traders should always seek confirmation from multiple sources.
An Inverse Head and Shoulders pattern is a bearish reversal pattern that typically forms after an uptrend has taken hold, consisting of lower highs forming one shoulder, higher but shallower peaks to form the head, and a horizontal neckline.
Ascending Triangle
The Ascending Triangle is a bullish chart pattern that signals an asset’s trend reversal. It consists of two lines; horizontal resistance at its peaks and rising trendlines near its lows; known for their symmetrical nature, these triangles have a high likelihood of producing breakouts in either direction.
As part of an ascending triangle formation, buyers gradually outnumber sellers in terms of aggression. This shows up on price charts by rising lows on price charts; when traders realize buyers are taking action and breaking out the triangle pattern is likely. To set profit targets traders can subtract the height between lowest high and highest low from breakout point before adding that amount back onto it; their profit target for their trade should then be determined accordingly.
Descending Triangle
A descending triangle chart pattern comprises one declining slope resistance line and one horizontal support line, giving rise to either bearish or bullish signals depending on its placement in an overall trend cycle.
An ascending triangle usually appears during a downward trend and indicates its continuation. Technicians can recognize this pattern by looking for its hallmark features: flat bottom trendline and lower high. Also important: its volume should decline as it approaches its apex.
Traders should look out for resistance levels that are higher than their previous support levels, signalling an upward price trend and using this information to plan trades accordingly.
Double Top
The Double Top pattern consists of two consecutive, relatively equal peaks separated by an intermediate trough and is considered bearish as it typically anticipates significant price decrease in the market. Traders use it to identify an opportunity to short-sell assets and capitalize on any subsequent downward trends that may follow.
At first peak, buyers dominated the market; when buyers realized that price momentum couldn’t rise further than second peak, sellers became dominant and this resulted in moderate price decreases and subsequent second peak of pattern.
Breaking of the neckline connecting the troughs will establish this pattern as a bearish trend reversal and signal when it is best to initiate short positions and maximize returns.
Double Bottom
Double bottoms are an ominous chart pattern that heralds an imminent longer-term shift. More specifically, double bottoms signal that the market has reached a major low and is projected to climb, suggesting increased buying pressure that pushes sellers out of the price.
Double bottom patterns require that their two low levels lie within 3% to 4% of each other for reliability and greater trading volume on second low and breakout points.
This pattern generally appears at the end of a downtrend and signals an impending bullish-to-bearish reversal, thus traders should wait for price to break above its neckline before entering. You can test out this and other patterns on ATAS platform which offers free trial access for 14 days without registration.
Pennant
A pennant pattern, which resembles a small symmetrical triangle, indicates a possible consolidation phase before continuing the current trend. A breakout from such patterns typically occurs about half-to-three-quarters into its formation and usually brings an increase in trading volume.
The cup and handle chart pattern is an effective crypto trading indicator that can indicate significant buying opportunities. The shape of this pattern includes two cups connected by handles – with its neckline acting as resistance while its extension on the right serving as support.
The Head and Shoulders chart pattern is an indicator of bearish trend reversal and comprises three successive peaks that come together into an ‘H&S’ formation. When complete and breaking above its neckline occurs, this signals an opportunity to purchase shares at discounted prices.
