Stock Market Patterns.

Appendix 1: Pattern Recognition
By default, Autochartist searches for the following patterns:
FIBONACCI-BASED PATTERNS
Pattern Type
What is it?
Why is it important?
How do I find it?
Suggests a potential market

reversal. The ABCD pattern
comprises three consecutive
price swings or trends.
Resembles a lightning bolt on
a chart.
Helps identify potential buying

and selling opportunities in
nearly any market over nearly
any timeframe. All other
Fibonacci patterns are based
on (or include) this pattern.
May provide a stronger trade
signal when it converges with
other patterns.
Each turning point (A, B, C,

and D) represents a significant
high or significant low on
a price chart. These points
define three consecutive price
swings, or trends, which make
up each of the three pattern
legs. These are referred to as
the AB leg, the BC leg, and the
CD leg.

reversal. Contains an ABCD
pattern preceded by a
significant high or low.
Represents a convergence
of Fibonacci extension ratios
where Point D = an extension
of BC and XA, and is formed
by two connecting triangles
at B.
The convergence of Fibonacci

extension ratios may provide
higher probability for a change
in market direction and may
provide a better risk-toreward ratio. Pattern failure
may suggest a strong
continuation move.
Butterfly patterns are similar

to Gartley patterns in that they
resemble an M or a W
shape on a price chart.

reversal. A visual, graphic
price/time pattern comprising
four consecutive price swings
or trends. Typically resembles
a W or M on a price chart.
Contains an ABCD pattern
preceded by a significant high
or low (point X).
May help identify potentially

higher-probability buying or
selling opportunities in nearly
any market and over nearly
any timeframe. Reflects the
convergence of Fibonacci
retracement and extension
levels at point D. May provide
a more favorable risk-toreward ratio.
For this pattern to be valid,

each turning point (X, A, B,
C and D) should represent a
significant high or significant
low on a price chart. These
points define four consecutive
price swings, or trends,
which make up each of the
four pattern legs. These are
referred to as the XA leg, AB
leg, the BC leg, and the
CD leg.
ABCD
A
C
B
D
D
B
C
A
Butterfly
A
C
B
D
D
X
B
C
A
Gartley
A
C
B
D
X
X
D
B
C
A
20
Pattern Type
What is it?
Why is it important?
How do I find it?

reversal. Formed by three
consecutive symmetrical
mountain tops (bearish) or
three consecutive symmetrical
valleys (bullish) Contains
two connecting (intertwined)
bearish ABCD patterns Also
contains a bearish butterfly
pattern (completing at the
third drive).
Suggests the market may be

at its most bullish or bearish,
in which a more significant
correction may occur. May
offer an excellent risk-toreward ratio. Pattern failure
suggests a strong continuation
may be in progress.
Price and time symmetry are

key, so the pattern should
really stand out as three
distinct, symmetrical drives
to a top or bottom. Traders
should remember that this
pattern is typically far less
common than a butterfly
or Gartley.
Three-Drive
1
2
3
3
STANDARD PATTERNS
Pattern Type
Physical
Characteristics
When does it form?
What does it
indicate?
Head and Shoulders

Three successive peaks:
middle being the highest and
two outside being lower and
relatively equal in height.
After an uptrend.
Often signals an upcoming

trend reversal.
Three successive peaks:

middle being the lowest and
two outside being higher and
relatively equal in height.
After a downtrend.
Often signals an upcoming

trend reversal.
A horizontal trading range

with two comparable highs
and two comparable lows
which can be connected to
form two parallel lines that
comprise a rectangle.
During a pause in a trend.
A consolidation zone or
trading range.
A trading range between

diagonal parallel lines.
When an up or downtrend is
formed between parallel
support and resistance lines.
Possibly either a reversal in the

trend or a change in the slope
of the current trend.
Small rectangle trading range

between diagonal parallel
lines; short term.
Typically following a sharp

advance or decline.
Often indicates a small

change in direction before the
previous trend resumes.
Inverse Head and Shoulders
Rectangles
Channels
Flags
21
Pattern Type
Physical
Characteristics
When does it form?
What does it
indicate?
A small symmetrical triangle

that converges.
Typically following a sharp

advance or decline.
Often indicates a small

change in direction before
the previous trend resumes.
Sideways pattern with two

converging trend lines.
When an upper trend line is

declining and a lower trend
line is rising.
Often represents a relatively

even balance between
buyers and sellers and may
indicate the continuation of
a previous trend.
Two or more equal highs form

a horizontal line at the top;
two or more rising troughs
form an ascending line that
meets the horizontal line.
During an uptrend.
Often represents a
continuation pattern if an
established trend exists.
Two or more equal lows

form a horizontal line at
the bottom; two or more
declining peaks form a
descending line that meets
the horizontal line.
During a downtrend.
Often represents a
continuation pattern if an
established trend exists.
Two converging lines slanted

upward (rising wedge) or
downward (falling wedge).
During an uptrend or
a downtrend.
Often represents a
continuation of the
original trend.
Two converging lines slanted

upward (rising wedge) or
downward (falling wedge).
After an uptrend or
a downtrend.
Often represents a reversal in

the original trend.
Two consecutive, roughly

equal peaks with a moderate
trough in between.
A major reversal pattern,

it occurs after an
extended uptrend.
Often represents a reversal

pattern that indicates a minor,
if not long term, change from
an uptrend to a downtrend.
Two consecutive, roughly

equal troughs with a
moderate peak in between.

it occurs after an
extended downtrend.

a downtrend to an uptrend.
Pennants
Symmetrical Triangles
Ascending Triangles
Descending Triangles
Wedge Continuation
Wedge Reversal
Double Top
Double Bottom
22
Pattern Type
Physical
Characteristics
When does it form?
What does it
indicate?
Three consecutive, roughly

equal peaks; may at first
resemble a double top.

it occurs after an
extended uptrend.

an uptrend to a downtrend.
Three consecutive, roughly

equal troughs; may at first
resemble a double bottom.

it occurs after an
extended downtrend.

a downtrend to an uptrend.
Triple Top
Triple Bottom
For more information about these and other Fibonacci-based patterns, including more detailed visual representations,
visit FX360.com and select Technical Analysis, then select Chart Patterns.
Glossary of Terms
Breakout: A breakout occurs when price movement breaks the support or resistance provided by a current trend line.
Autochartist offers ratings of breakouts based on their strength.
Completed Pattern: A pattern identified by Autochartist where a breakout has occurred. Viewing a completed
pattern will display Autochartists forecast of price movement.
Currency Pair: Forex trading is the simultaneous buying and selling of currencies based on their value in relation to
other currencies. Unlike many other types of trading, forex is always traded (and quoted) in pairs. When you buy one
currency, you are selling another and vice versa.
DiNapoli MACD: One of the DiNapoli D-Levels tools included free with DealBook 360, the DiNapoli MACD enables
traders to gauge market momentum and possible reversal points.
Emerging Pattern: A pattern identified by Autochartist where a breakout has not occurred. Traders should use
emerging patterns only as hints as to where a market may be moving, not as the basis for placing a trade.
Fibonacci Extensions: A very popular tool among traders whose strategies are based on technical analysis. Like
Fibonacci retracements, Fibonacci extensions are derived from mathematical relationships based on ratios, the most
important of which are 23.6%, 38.2%, 50%, 61.8% and 100%. They are used to help determine where a current
move or trend may end.
Fibonacci retracement: A very popular tool among traders whose strategies are based on technical analysis. Fibonacci
retracements are derived from mathematical relationships based on ratios, the most important of which are 23.6%,
38.2%, 50%, 61.8% and 100%. A Fibonacci retracement is created by taking two extreme points on a chart (usually
a peak and trough) and dividing the distance by those key ratios. DealBook 360 and DealBook WEB offer a free
Fibonacci retracement tool.
23

Stock Market Patterns.

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Appendix 1: Pattern Recognition

By default, Autochartist searches for the following patterns:

How do I find it?

Suggests a potential market

Helps identify potential buying

Each turning point (A, B, C,

Suggests a potential market

The convergence of Fibonacci

Butterfly patterns are similar

Suggests a potential market

May help identify potentially

For this pattern to be valid,

How do I find it?

Suggests a potential market

Suggests the market may be

Price and time symmetry are

When does it form?

Head and Shoulders

Often signals an upcoming

Three successive peaks:

Often signals an upcoming

A horizontal trading range

During a pause in a trend.

A trading range between

Possibly either a reversal in the

Small rectangle trading range

Typically following a sharp

Often indicates a small

Inverse Head and Shoulders

When does it form?

A small symmetrical triangle

Typically following a sharp

Often indicates a small

Sideways pattern with two

When an upper trend line is

Often represents a relatively

Two or more equal highs form

Two or more equal lows

Two converging lines slanted

Two converging lines slanted

Often represents a reversal in

Two consecutive, roughly

A major reversal pattern,

Often represents a reversal

Two consecutive, roughly

A major reversal pattern,

Often represents a reversal

When does it form?

Three consecutive, roughly

A major reversal pattern,

Often represents a reversal

Three consecutive, roughly

A major reversal pattern,

Often represents a reversal

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