Chart Formations & Reversals — Q&A

Identifies and forecasts market trends by studying price and volume (trading activity), not company fundamentals. Practitioners are chartists.

Bullish — price falls, flattens, then rises (downward trend reversed upward). Chartist may go long (buy). ⚠️ Reverse downward trend = bullish; reverse upward trend = bearish.

Price rises, levels off, then falls — reverse upward trend. Bearish indicator. Chartist may go short (unlimited risk on short sales).

Top: rises/pauses/rises/pauses/falls — bearish, short sell. Bottom: falls/pauses/falls/pauses/rises — bullish, go long. Shapes resemble a person (top) or upside-down person (bottom).

Fundamental: What to buy (financial health, earnings, P/E, balance sheets — intrinsic value). Technical: When to buy/sell (price patterns, trends). Many investors combine both.

Market behavior tends to repeat over time. Limitation: the market can always move the other way — it’s a prediction tool, not certainty.

First = fundamental (earnings, P/E). Second = technical (resistance breakout, momentum).

Saucer bottom = bullish; saucer top = bearish; H&S bottom = bullish; H&S top = bearish. Bottom formations bullish; top formations bearish.