Arab Academy for Science and Technology & Maritime Transport Investment and finance Institute

Technical Analysis Lecturer: Mr. - Ahmed el oteify

Reversal and Continuation Patterns Ahmed Oteify

Reversal Patterns A reversal pattern reverses the trend direction from an uptrend to a downtrend and vice versa When an uptrend reverses to a downtrend, buyers are getting weaker, and sellers are getting stronger When an downtrend reverses to an uptrend, sellers are getting weaker, and buyers are getting stronger During a reversal formation, there is a shift in the power between buyers and sellers (demand and supply). This shift in strength is the reason for the trend reversal

Reversal Patterns * Head and Shoulders Reverses the trend from the upside to the downside * Inverted Head and Shoulders Reverses the trend from the downside to the upside * Double Tops and Triple Tops Reverses the trend from the upside to the downside * Double and Triple Bottoms Reverses the trend from the downside to the upside Wedges

Head-and-Shoulders Head-and-Shoulders The Head-and-Shoulders price pattern is the most reliable and well- known chart pattern. It gets its name from the resemblance of a head with two shoulders on either side. The reason this reversal pattern is so common is due to the manner in which trends typically reverse. The Head-and-Shoulders price pattern is the most reliable and well- known chart pattern. It gets its name from the resemblance of a head with two shoulders on either side. The reason this reversal pattern is so common is due to the manner in which trends typically reverse. A up-trend is formed as prices make higher-highs and higher A up-trend is formed as prices make higher-highs and higher lows in a stair-step fashion. The trend is broken when this upward climb ends. As you can see in the following illustration, the "left shoulder" and the "head" are the last two higher-highs lows in a stair-step fashion. The trend is broken when this upward climb ends. As you can see in the following illustration, the "left shoulder" and the "head" are the last two higher-highs

The right shoulder is created as the bulls try to push prices higher, but are unable to do so. This signifies the end of the up-trend. Confirmation of a new down-trend occurs when the "neckline" is penetrated The right shoulder is created as the bulls try to push prices higher, but are unable to do so. This signifies the end of the up-trend. Confirmation of a new down-trend occurs when the "neckline" is penetrated During a healthy up-trend, volume should increase during each rally. A sign that the trend is weakening occurs when the volume accompanying rallies is less than the volume accompanying the preceding rally. In a typical Head-and-Shoulders pattern, volume decreases on the head and is especially light on the right shoulder During a healthy up-trend, volume should increase during each rally. A sign that the trend is weakening occurs when the volume accompanying rallies is less than the volume accompanying the preceding rally. In a typical Head-and-Shoulders pattern, volume decreases on the head and is especially light on the right shoulder Following the penetration of the neckline, it is very common for prices to return to the neckline in a last effort to continue the up-trend (as shown in the preceding chart). If prices are then unable to rise above the neckline, they usually decline rapidly on increased volume. Following the penetration of the neckline, it is very common for prices to return to the neckline in a last effort to continue the up-trend (as shown in the preceding chart). If prices are then unable to rise above the neckline, they usually decline rapidly on increased volume. An inverse (or upside-down) Head-and-Shoulders pattern often coincides with market bottoms. As with a normal Head-and-Shoulders pattern, volume usually decreases as the pattern is formed and then increases as prices rise above the neckline. An inverse (or upside-down) Head-and-Shoulders pattern often coincides with market bottoms. As with a normal Head-and-Shoulders pattern, volume usually decreases as the pattern is formed and then increases as prices rise above the neckline.

Price Target after the break of the neckline Target

Head & Shoulders Selling after confirmation Selling before confirmation

Inverse Head & Shoulders

Target

Double Top

Double Bottom Target

Wedges

Falling Wedge

Rising Wedge

Continuation Patterns A continuation pattern appears during the trend and it acts as a continuation. A continuation pattern shows balance between buyers and sellers. It is a sideways movement that shows that buyers and sellers are having the same strength When continuation pattern appears after an uptrend, the trend is expected to continue to the upside, and vice versa. Continuation patterns can act as reversal sometimes.

AHMED EL OEIFY Continuation Patterns * Triangles Symmetrical Balance Ascending Bullish Descending Bearish * Rectangles Balance between buyers and sellers * Flags and Pennants Continuation formations, can be bullish or bearish Cub & Handle Bullish

Symmetrical Triangle

Ascending Triangle

Descending Triangle

Flags and Pennants

Cub & Handle Continuation

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GOOD LUCK Ahmed Oteify