Double Tops
The double top is a major reversal pattern that forms after an extended uptrend. As its name implies, the pattern is made up of two consecutive peaks that are roughly equal, with a moderate trough in-between. With any reversal pattern, there must be an existing trend to reverse. A significant uptrend of several months should be in place in the case of the double top. The first peak should mark the highest point of the current trend. After the first peak, a decline takes place that typically ranges from 10 to 20%. While the double top formation may seem straightforward, technicians should take proper steps to avoid deceptive double tops. The peaks should be separated by about a month. If the peaks are too close, they could just represent normal resistance rather than a lasting change in the supply/demand picture.
Triple Tops
The triple top is a reversal pattern made up of three equal highs followed by a break below support. In contrast to the triple bottom, triple tops will usually typically range from 3 to 6 months. During the development of the triple top volume levels usually decline. After the third high, an expansion of volume on the subsequent decline and at the support break greatly reinforces the soundness of the pattern. The longer the pattern develops, the more significant is the ultimate break.
Symmetrical Triangles
Symmetrical triangles are chart patterns where trend lines can be drawn to show a triangle as shown in the chart below. The line is roughly the same angle going down as the support line is going up, leading to the symmetrical structure. The price action makes a lower highs and higher lows. Technical wisdom suggests that the symmetrical triangle can break in either direction, but once broken an asset will continue in the direction of the break.
Head and Shoulders
A Head and Shoulders reversal pattern forms after an uptrend, and its completion marks a trend reversal. The pattern contains three successive peaks with the middle peak (head) being the highest and the two outside peaks (shoulders) being low and roughly equal. The reversal is confirmed once the asset price breaks below the neckline (key support). It is important to establish the existence of a prior uptrend for this to be a reversal pattern. Without a prior uptrend to reverse, there cannot be a Head and Shoulders reversal pattern.
