Crypto chart patterns come in all forms and shapes. Some stand out among their counterparts due to two horizontal lines connecting series of price highs and lows – they’re easily recognizable.
These patterns typically appear during uptrends and can provide either bullish or bearish signals, earning the name trend continuation patterns.
Head and Shoulders
Head and Shoulders is a pattern that typically appears at the end of an uptrend and signals its reversal. It consists of three peaks with the center peak being higher than both left and right peaks.
Once the price reaches its initial peak, it begins a downward slide and eventually returns back towards its previous swing low. Unfortunately, this rebound doesn’t last very long before prices resume their descent, creating another low and thus creating another shoulder.
After this initial peak is reached, a rally typically follows to reach another peak before failing to surpass it and form the head. At the neckline connecting both heads and shoulders lies where traders seek opportunities to short the market; traders should note however, that as this pattern runs counter-trend, it could take weeks or months before markets break below this line.
Double Top
Double Top patterns consist of two price peaks close together in terms of price. Traders may notice the first peak is reached with greater volume while subsequent attempts fail to hit this mark and start falling away from its level.
A neckline refers to the price valley that forms between two peaks, and traders should look for any break of this neckline as confirmation that their pattern can be traded profitably.
Time gap between peak formations is also an indicator. To maximize chances for short positions to open quickly and predict trend reversals. A bearish cryptocurrency chart pattern that features such formation may even include retesting the first peak before moving downward again.
Triple Top
The Triple Top pattern is a bearish indicator that could signal an impending sell-off, with three consecutive price peaks at the same level and moderate-to-low volume each time, followed by prices falling beneath a support level created by low points on each peak. While not as reliable as other crypto chart patterns such as Head and Shoulders, Triple Top still serves as an early warning system of impending trend reversals.
The Triple Top pattern often appears at the end of an uptrend and serves as a strong sell signal, acting in contrast with its counterpart, the Double Bottom reversal pattern (looks like an M), which involves spearing support levels two times without succeeding.
Rising Wedge
One of the most widely-recognized crypto chart patterns is the rising wedge, which often indicates either trend reversal or continuation depending on market context. Traders can use this indicator to anticipate upcoming shifts in market trends and adjust their trading positions accordingly.
This pattern shows two sloped lines converge to form a wedge shape. The bottom line of the wedge has steeper slope than its top line, creating a narrowing range for prices and ultimately leading them down toward its base line and ultimately falling.
Traders should look for a resistance trend line covering the high points of the wedge pattern that slants upward as it steps up towards higher lows and forms new lows. Furthermore, traders should search for support trendlines which connect its low points as support lines.
Bart Simpson
The Bart Simpson Pattern is a chart formation that mimics the cartoon character’s hairstyle, featuring an abrupt rally, uneven sideways trading patterns, and then an abrupt decline that erases any previous gains.
This pattern can occur with any cryptocurrency but is most associated with Bitcoin due to its frequent bouts of extreme volatility and ripple effect – changes to BTC can impact other coins’ prices and vice versa.
Traders familiar with the Bart Simpson pattern can benefit from understanding its characteristics and implications when making investment decisions. Furthermore, understanding it may enable them to more accurately forecast future price trends, helping increase profits or protect investments when markets turn bearish.
