![]() This is why it can be very dangerous to try to anticipate double and triple tops/bottoms, because often they don't fully complete and price will resume the prior trend. Because the swing points following the double and triple highs or lows don't break to confirm the patterns, those reversals are not confirmed. It's worth noting that these rectangle price patterns are essentially failed double and triple tops/bottoms. The only difference between the bullish and bearish variations is that the bullish rectangle pattern starts after a bullish trending move, and the bearish rectangle pattern starts after a bearish trending move. The rectangle pattern is defined by a strong trending move followed by two or more nearly equal tops and bottoms that create two parallel horizontal trendlines (support and resistance). It is very similar to the channel pattern, except that the pattern does not have a slope against the preceding trend which gives it a higher chance of successful continuation. The rectangle price pattern is a continuation pattern that follows a trending move. As we can see, the double bottom is a slightly more effective breakout pattern than the double top, reaching its target 78.55% of the time compared to 75.01%. This is actually the first of our patterns with a statistically significant difference between the bullish (double bottom) and bearish (double top) version. The pattern is considered a success when price covers the same distance following the breakout as the distance from the double high to the recent swing low point in a double top, or the distance from the double low to the recent swing high in a double bottom (see red arrows). The pattern is complete when price breaks below the swing low point created after the first high in a double top, or when price breaks above the swing high point created by the first low in a double bottom. Generally, the wider the gap between touches the more powerful the pattern becomes. The double top is defined by two nearly equal highs with some space between the touches, while a double bottom is created from two nearly equal lows. The double top/bottom is one of the most common reversal price patterns. ![]() The pattern is considered successful when price has achieved a movement from the outer edge of the pattern equal to the distance of the initial trending move that started the channel pattern. This pattern is complete when price breaks through the lower trendline in an ascending channel or abovethe lower trendline in a descending channel pattern. The descending channel pattern is defined by a bullish trending move followed by a series of lower highs and lower lows that form parallel trendlines that contain price. The ascending channel pattern is defined by a bearish trending move followed by a series of higher lows and higher highs that form parallel trendlines containing price. Note that the channel pattern is similar to the flag in that they both have periods of consolidation between parallel trendlines, but the channel pattern is generally wider and consists of many more bars which increases its strength and success rate. The channel price pattern is a fairly common sight in trending moves that have good volume and acts as a delayed continuation pattern. Note that most pattern projections are measured from the breakout point, but flags, pennants, and channel patterns are all measured from the outer edge of the pattern instead as shown by the red arrows in the chart examples. This pattern is considered successful when it breaks the upper trendline in a bull flag (or the lower trendline in a bear flag) and then proceeds to cover the same distance as the prior trending move starting from the outer edge of the pattern. The higher and tighter (narrower) the pattern, the higher percentage that the pattern will break favourably in the prevailing trend direction. The best flag patterns have two features: 1) a very strong run in price (near vertical) prior to the setting up of the flag and 2) a tight flag that occurs right on the upper (or lower) edge of that run. The flag pattern appears as a small rectangle that is usually tilted against the prevailing trend in price. ![]() Longer and wider patterns are defined as channels (see below). These patterns are small hesitations in strong trends, so they are usually only composed of a small number of price bars (about 20). It consists of a strong bullish trending move followed by a rapid series of lower highs and lower lows for a bull flag, or a strong bearish trending move followed by a rapid series of higher lows and higher highs for a bear flag. The flag is a continuation pattern that can occur after a strong trending move.
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