Local Reversal Structures And Patterns

I already introduced the head and shoulders structure in a previous lesson and now we will take a look at a few more reversal and transitioning structures. Patterns and local structures are another confirmation type and building block and they often foreshadow a trend reversal or help us time entries.

The 5 most important patterns and structures:

Here are the 5 most important structures and patterns that you need to know about. We will dig much deeper later on, but it’s important that you know about those structures early on because they will come up over and over again.

Trendlines and trendline breaks
Remember, we look for transitioning points where trending phases shift by waiting for a strong break of an obvious trendline.

Head and shoulders
Our classic wave pattern that symbolizes the gradual shift from one trend direction into the next. The neckline is also a kind of trendline.

Triangles

Triangles and wedges show a contraction in price behavior. The narrower a triangle, the stronger the breakout usually is. A triangle at a market top can be a powerful transition structure.

Traps

Traps show up in many different forms and shapes and we will spend quite some time later on, exploring the different trap and squeeze patterns.

Flip zones and retest

Retests and flip zones can occur around all patterns that we have learned here and as we will see in a later lesson, flip zones can help us identify entry or re-entry opportunities.

If you scroll back, you will see that I marked the flip-zones and retests on other structures as well.