Summary Table for Chart Pattern Classification Rules
This post in relation to our guide on spotting chart patterns on the subject of Chart Patterns
The article only covers the patterns created from the trend line pairs. The following types of patterns are not covered under this article.
- Flag Patterns and Pennants
- Head and Shoulders and the Inverse
- Double top and Double bottom
- Triple Top and Triple bottom
- Cup and Handle and the Inverse
- Rounding Bottom and Top Patterns
The above patterns are not based on the trend line pairs, or they are extension to the trend line pair based patterns that depend on the price movements or the trends prior to the patterns. They will be covered under a different article.
In the current article, we concentrate on the wedge patterns, symmetrical triangles and price channels
Here is a simple table to remember the correlation of recognizable stock chart patterns
Pattern | Upper Trend Line | Lower Trend Line | Relation between trend Lines |
Rising Wedge (Contracting) | Rising | Rising | Contacting |
Rising Wedge (Expanding) | Rising | Rising | Expanding |
Falling Wedge (Contracting) | Falling | Falling | Contracting |
Falling Wedge (Expanding) | Falling | Falling | Expanding |
Converging Triangle | Falling | Rising | Contracting |
Diverging Triangle | Rising | Falling | Expanding |
Ascending Triangle (Contracting) | Flat | Rising | Contracting |
Ascending Triangle (Expanding) | Rising | Flat | Expanding |
Descending Triangle (Contracting) | Falling | Flat | Contracting |
Descending Triangle (Expanding) | Flat | Falling | Expanding |
Uptrend/Ascending Channel | Rising | Rising | Parallel |
Downtrend/Descending Channel | Falling | Falling | Parallel |
Ranging Channel | Flat | Flat | Parallel |
Details with Examples of Each Patterns
Once we identify the direction and characteristics of trend lines, we can go on and classify the pattern in following categories.
Rising Wedge (Contracting)
Rules for Contracting Rising Wedge PatternĀ are as follows:
- Both Trend Lines are Rising
- Trend Lines are converging.
Rising Wedge (Expanding)
Rules for the Expanding Rising Wedge are as follows:
- Both Trend Lines are rising
- Trend Lines are diverging.
Falling Wedge (Contracting)
Rules for the Contracting Falling Wedge are as follows:
- Both Trend Lines are falling
- Trend Lines are contracting.
Falling Wedge (Expanding)
Rules for the Expanding Falling Wedge are as follows:
- Both Trend Lines are falling
- Trend Lines are diverging.