{"id":37569,"date":"2021-11-11T08:56:12","date_gmt":"2021-11-11T08:56:12","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=37569"},"modified":"2026-03-06T06:28:45","modified_gmt":"2026-03-06T06:28:45","slug":"common-chart-patterns-2","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/portfolio-management\/common-chart-patterns-2\/","title":{"rendered":"Common Chart Patterns"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Which of the following is most likely a reversal pattern?\",\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B.\\n\\nA reversal pattern indicates that an earlier trend is likely to reverse once it is complete. A triple top is a reversal pattern.\\n\\nA and C are incorrect. Continuation patterns suggest a pause in a trend. Both rectangles and triangles are continuation patterns.\"\n    },\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A rectangle.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A triple top.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"An ascending triangle.\"\n      }\n    ],\n    \"answerCount\": 3\n  }\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-1024x837.jpg\",\n  \"caption\": \"Flags and Pennants\",\n  \"width\": 1024,\n  \"height\": 837,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/10\/Bearish-Rectangle.jpg\",\n  \"caption\": \"Bearish Rectangle\",\n  \"width\": 1590,\n  \"height\": 1433,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/10\/Bullish-Rectangle.jpg\",\n  \"caption\": \"Bullish Rectangle\",\n  \"width\": 1590,\n  \"height\": 1433,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-1024x515.jpg\",\n  \"caption\": \"Continuation Patterns\",\n  \"width\": 1024,\n  \"height\": 515,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-1024x507.jpg\",\n  \"caption\": \"Triple Tops and Bottoms\",\n  \"width\": 1024,\n  \"height\": 507,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8.jpg\",\n  \"caption\": \"Double Tops and Bottoms\",\n  \"width\": 1590,\n  \"height\": 1266,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7.jpg\",\n  \"caption\": \"Head and Shoulders Bottom\",\n  \"width\": 1590,\n  \"height\": 1323,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6.jpg\",\n  \"caption\": \"Head and Shoulders Top\",\n  \"width\": 1590,\n  \"height\": 1377,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  }\n}\n<\/script>\n\n\n\n<p>A chart pattern is a distinct trading formation that appears repeatedly. It can be used to predict future price movements of a given stock. The formations appear on price charts and create unique, recognizable shapes. Analysts study these formations when trying to predict the future course of prices. The patterns reveal the collective psychological relationships within &nbsp;a market at a given time. There are two major types of chart patterns, i.e., reversal patterns and continuation patterns. Let\u2019s take a look at what the two entail.<\/p>\n<p><!--more--><\/p>\n<h2><strong>Reversal Patterns<\/strong><\/h2>\n<p>A reversal pattern indicates that a prior trend is likely to reverse once the pattern is complete. The term \u2018reversal\u2019 actually refers to the trend of &nbsp;a&nbsp; stock prior to the development of the pattern. In fact, for a pattern to have &nbsp;any predictive value, the &nbsp;it must be preceded by a clear, distinguishable trend. Caution is necessary when trying to identify patterns for the purpose of price prediction. Perhaps the most useful and widely recognized reversal pattern is the head-and-shoulders pattern.<\/p>\n<p>As the name suggests, the head-and-shoulders pattern has three distinctive parts. It appears in form of a peak (left shoulder), followed by a higher peak (head), and then a lower head (right shoulder). When the lowest points of the two troughs are connected, they form what analysts call a \u201cneckline.\u201d This type of pattern is preceded by an uptrend.<\/p>\n<div style=\"text-align:center; margin:18px 0;\">\n<a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\" style=\"display:inline-flex; align-items:center; justify-content:center; padding:10px 18px; border:2px solid #1e5bd8; color:#1e5bd8; background:#f5f7fb; border-radius:9999px; text-decoration:none; font-weight:600; white-space:nowrap;\">\nAnalyze chart patterns like head-and-shoulders with CFA practice questions\n<\/a>\n<\/div>\n<h3><strong>Head and Shoulders<\/strong><\/h3>\n<p>As the name suggests, the head and shoulders pattern has 3 distinctive parts. It appears in form of a peak (left shoulder), followed by a higher peak (head), and then a lower head (right shoulder). When the lowest points of the two troughs are connected, they form what analysts call a \u201cneckline.\u201d This type of pattern is preceded by an uptrend.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1590\" height=\"1377\" class=\"aligncenter size-full wp-image-38985\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6.jpg\" alt=\"\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6.jpg 1590w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6-300x260.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6-1024x887.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6-768x665.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6-1536x1330.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-6-400x346.jpg 400w\" sizes=\"auto, (max-width: 1590px) 100vw, 1590px\" \/><\/p>\n<p>The three parts of the pattern are as follows:<\/p>\n<ol>\n<li><strong>Left shoulder<\/strong>: The left shoulder forms a peak (high point) of the current trend. It may represent the highest volume of the entire pattern. It is followed by downtrend to complete the formation of a trend.<\/li>\n<li><strong>Head<\/strong>: This begins from the low of the left shoulder. Head signals that reversal is imminent. Towards the top of the head, the volume tends to decrease.<\/li>\n<li><strong>Right shoulder<\/strong>: The right shoulder is formed from the advance from the low of the head. This peak is lower than the head (a lower high) and is usually aligned to the high of the left shoulder. The volume tends to be the lowest on the second shoulder.<\/li>\n<\/ol>\n<p>The head doubles up as the second peak and the highest point in the pattern. Neither the left shoulder nor the right one exceeds the head. In an attempt to profit from a security that exhibits a head-and-shoulders pattern, technicians set a price target equal to:<\/p>\n<p>$$ \\text{Price target} = \\text{Neckline} \u2013 (\\text{Head} \u2013 \\text{Neckline}) $$<\/p>\n<p>Investors should anticipate the price target and <strong>close<\/strong> the investment at that point. Eying even higher returns beyond the price target almost always results in lesser returns.<\/p>\n<h3><strong>Inverse Head and Shoulder<\/strong><\/h3>\n<p>In addition, there are head and shoulders patterns preceded by downtrends called inverse head and shoulders which can be analyzed the same way as the reversal ones.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1590\" height=\"1323\" class=\"aligncenter size-full wp-image-38989\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7.jpg\" alt=\"\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7.jpg 1590w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7-300x250.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7-1024x852.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7-768x639.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7-1536x1278.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-7-400x333.jpg 400w\" sizes=\"auto, (max-width: 1590px) 100vw, 1590px\" \/><\/p>\n<p>The three parts of the inverse head and shoulders are as follows:<\/p>\n<ol>\n<li>Left shoulder: This shoulder represents a strong decline, where the slope of the decline is greater than that of the previous downtrend. The price tends to revert back to the level where the rally started, thus forming a V shape<\/li>\n<li>Head: At the head, the price significantly declines to a lower low than the left shoulder. This second decline also reverts back and the price rises to the same level at which the left shoulder began and ended, signaling that the decline may be coming to an end and that a reversal may be near.<\/li>\n<li>Right shoulder: The right shoulder approximately reflects the mirror image of the left shoulder. Here, the price decline is approximately at the same level as the left shoulder, but reverses at higher low price.<\/li>\n<\/ol>\n<p>In an inverse head and shoulders pattern, the price target is calculated as follows<\/p>\n<p>$$\\text{Price target = Neckline + (Neckline \u2013 Head)}$$<\/p>\n<p>It calculates how high the price is expected to rise once it breaches the neckline.<\/p>\n<p>Other reversal patterns include double top, double bottom, and triple bottom patterns.<\/p>\n<h3><strong>Double Tops<\/strong><\/h3>\n<p>Double top is formed when an asset gets to a high price two consecutive times with a moderate decline between the two highs. This pattern is confirmed once the price of the asset falls below a specific support level equal to the low between the two prior highs. Here, the volume is lower on the second high than on the first high, signaling diminishing demand. The pattern is considered to be more significant when the time between the tops is longer and the sell-off of the first top is deep. A double top is a very bearish technical reversal pattern.<\/p>\n<h3><strong>Double Bottom<\/strong><\/h3>\n<p>In double bottom, the price reaches low, reverts and then declines to the initial low level. This pattern is confirmed when the price must move above the high swing that occurred between the two lows. In double bottom, the neckline is horizontal and touches &nbsp;the minor high between two major troughs.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1590\" height=\"1266\" class=\"aligncenter size-full wp-image-38991\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8.jpg\" alt=\"\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8.jpg 1590w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8-300x239.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8-1024x815.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8-768x612.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8-1536x1223.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-8-400x318.jpg 400w\" sizes=\"auto, (max-width: 1590px) 100vw, 1590px\" \/><\/p>\n<h3><strong>Triple Tops and Bottoms<\/strong><\/h3>\n<p>Triple top is made up of three peaks at approximately same price level. Triple bottom is made up of three troughs at app.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1590\" height=\"788\" class=\"aligncenter size-full wp-image-38992\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9.jpg\" alt=\"\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9.jpg 1590w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-300x149.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-1024x507.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-768x381.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-1536x761.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-9-400x198.jpg 400w\" sizes=\"auto, (max-width: 1590px) 100vw, 1590px\" \/><\/p>\n<h2><strong>Continuation Patterns<\/strong><\/h2>\n<p>Unlike reversal patterns, continuation patterns suggest a pause in a trend. Some of the most well-known patterns under this category are triangles. Market veterans further subdivide these into symmetrical triangles, ascending triangles, and descending triangles. A triangle forms as the range between the high and low prices narrows. As a result, all the three types of triangles form after the convergence of two trend lines.<\/p>\n<p>On an ascending triangle, two or more equal highs form a horizontal line representing overhead supply. This line serves as a price ceiling, effectively preventing further movement of price. Another two or more troughs form an ascending line that converges on the upper horizontal line. Although the price remains below the upper ceiling, the higher lows signify increased buying pressure, hence the \u201cbullish\u201d formation.<\/p>\n<p>The descending triangle forms during a downtrend. Two or more equal lows form a horizontal line at the bottom, representing overhead demand. This line serves as a price floor, effectively preventing further decline in price. Another two or more declining peaks form a descending line that converges on the horizontal line. Although the price remains above this level, the lower highs signify increased selling pressure, hence the \u201cbearish\u201d formation.<\/p>\n<p>Lastly, the symmetrical triangle forms during a trend, containing at least two higher lows and two lower highs. Connecting these points yields convergence.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1578\" height=\"793\" class=\"aligncenter size-full wp-image-39368\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns.jpg\" alt=\"Continuation patterns\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns.jpg 1578w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-300x151.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-1024x515.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-768x386.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-1536x772.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Continuation-patterns-400x201.jpg 400w\" sizes=\"auto, (max-width: 1578px) 100vw, 1578px\" \/><\/p>\n<p>Other continuation patterns include rectangles and flags, and pennants.<\/p>\n<h2><strong>Rectangle Pattern<\/strong><\/h2>\n<p>A rectangle is a continuation pattern formed by two parallel trend\u00adlines, whereby one line connects the high prices, and the other connects the lows. The horizontal resistance line that forms the top of the rectangle shows an end to the rally as the investors are repeatedly selling shares at a specific price level. The horizontal support line that forms the bottom of the rectangle signals reversal in decline as the investors are repeatedly making large purchases at the same price level.<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-39513\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/10\/Bullish-Rectangle.jpg\" alt=\"\" style=\"max-width: 100%;\"><img decoding=\"async\" class=\"alignnone size-medium wp-image-39514\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/10\/Bearish-Rectangle.jpg\" alt=\"\" style=\"max-width: 100%;\"><\/p>\n<div class=\"notes_inv\">\n<h2><strong>Flags and Pennants<\/strong><\/h2>\n<p>A <strong>flag<\/strong> &nbsp;comprises parallel trendlines. In an uptrend, the flag\u2019s trendlines are downward sloping. In a flag formation, it is assumed that the trend will continue in the same direction.<\/p>\n<p><strong>Pennant<\/strong>: A pennant is similar to a triangle. However, the pennant is a short-term formation, whereas a triangle is a long-term formation. In a pennant formation, it is assumed that the trend will continue in the same direction.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1590\" height=\"1300\" class=\"aligncenter size-full wp-image-38987\" style=\"max-width: 100%;\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11.jpg\" alt=\"\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11.jpg 1590w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-300x245.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-1024x837.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-768x628.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-1536x1256.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2021\/11\/Technical-Analysis-11-400x327.jpg 400w\" sizes=\"auto, (max-width: 1590px) 100vw, 1590px\" \/><\/p>\n<blockquote>\n<h2><strong>Question<\/strong><strong>&nbsp;<\/strong><\/h2>\n<p>Which of the following is <em>most likely<\/em> a reversal pattern?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li>A rectangle.<\/li>\n<li>A triple top.<\/li>\n<li>An ascending triangle.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>B<\/strong>.<\/p>\n<p>A reversal pattern indicates that an earlier trend is likely to reverse once it is complete. A triple top is a reversal pattern.<\/p>\n<p><strong>A and C are incorrect.<\/strong> Continuation patterns suggest a pause in a trend. Both rectangles and triangles are continuation patterns.<\/p>\n<\/blockquote>\n<\/div>\n<div style=\"text-align:center; margin:32px 0 10px;\">\n\n<a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\" style=\"display:inline-flex; align-items:center; justify-content:center; padding:12px 24px; border-radius:9999px; background:#1e5bd8; color:#ffffff; font-weight:700; text-decoration:none;\">\nStart Free Trial \u2192\n<\/a>\n\n<p style=\"margin-top:12px; font-size:16px; line-height:1.5;\">\nMaster technical analysis concepts such as trend reversals, support and resistance, and chart patterns through CFA exam-style practice questions.\n<\/p>\n\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A chart pattern is a distinct trading formation that appears repeatedly. It can be used to predict future price movements of a given stock. The formations appear on price charts and create unique, recognizable shapes. Analysts study these formations when&#8230;<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[],"class_list":["post-37569","post","type-post","status-publish","format-standard","hentry","category-portfolio-management","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Common Chart Patterns for CFA Level 1 | Portfolio Management<\/title>\n<meta name=\"description\" content=\"Here are the common chart patterns in portfolio management, including continuation and reversal patterns, top-bottom charts, and printable stock chart patterns.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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