The explain strong reversal patterns and the difference between continuation and reversal setups, useful for beginners in technical analysis. Here's how you can understand them:
1. Strong Reversal Patterns
Double Top: Indicates bearish reversal; occurs after an uptrend when the price forms two peaks at a resistance level.
Double Bottom: Indicates bullish reversal; forms two lows at a support level after a downtrend.
Head & Shoulders: Bearish reversal with a peak (head) flanked by two lower peaks (shoulders).
Inverse Head & Shoulders: Bullish reversal with a trough (head) flanked by two higher troughs.
Rising Wedge: Bearish; price moves upward but converges, breaking downward.
Falling Wedge: Bullish; price moves downward in a narrowing channel and breaks upward.
2. Continuation vs. Reversal Patterns
Reversal: Indicates a shift in trend (e.g., from rally to drop or vice versa).
Supply Reversal: Price fails to sustain above resistance, dropping after forming a base.
Demand Reversal: Price fails to sustain below support, rallying after forming a base.
Continuation: Trend remains intact (e.g., rally continues after consolidation).
Demand Continuation: Support level holds, and the price resumes upward.
Supply Continuation: Resistance holds, and the price resumes downward.
By identifying these patterns, traders can predict potential price movements, set better entry/exit points, and manage risks effectively.
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