The 7 Best Stock Chart Patterns -- and 1 Bad One . With David Moadel
welcome to looking at the markets with David Modell I found an article I like
to share articles with you especially if they're really useful this is from Cody
hind at the samurai Trading Academy and this is a few years old but I believe
it's still worth it because there's so much research behind this now you have
to make your own decisions don't rely on me or on anybody you got to make your
own decisions okay and none of these patterns work all the time so please be
aware of that but Cody Hein from the samurai training academy.com
and I'm gonna put the link to this article in the description below this
video so you can click on it if you want to it's testing out the very common
price action patterns that you use or that people use in stocks options
commodities crypto currencies Forex and so on and according to the article here
the statistics on the price action patterns below which we're going to look
at were accumulated through testing of ten years of data and over two hundred
thousand patterns Wow so even though this article is a few
years old it has some pretty robust data here and research according to the
article all right so let's look at these seven seven most reliable according to
this article stock and option and so on price action patterns and at the end
they actually talked about one pattern that they found to be not reliable
alright so let's start with number seven of the most reliable chart patterns the
bull flag and the bear flag with around 60 to 67 or 68 percent success rate
there's the bull flag okay where the price action Rises and then consolidates
into a channel and then breaks out it's a continuation pattern and then the bear
flag is also continual continuation pattern but it's the opposite the price
action is going down and then it consolidates into a channel for a while
and then breaks down that's number seven number six the ascending triangle and
the descending triangle triangle patterns with about a seventy three
percent reliability rate according to the article ascending is when you get
into a range but it's a narrowing range so the
actions going up and then into a range that goes narrower and narrower and then
breaks out okay and that's another continuation pattern and the descending
triangle is the opposite price actions going down and then it consolidates into
a range that's going narrow or a narrower and then breaks down below that
alright let's go to number five another continuation pattern the ascending
channel and the descending channel about a seventy three percent reliability rate
that's pretty good actually okay so you've got the price action rising and
then consolidating into a channel not a narrowing channel like we saw before
with the triangles just kind of a straight channel there and then it
breaks out that's the ascending channel that's a continuation pattern another
continuation pattern or the descending channel that's the opposite price action
is falling it consolidates into a channel and then breaks down again
number four double top and double bottom I like these I like it especially the
double bottom we'll talk about that in a moment the double top is when the price
action on by the way this has the double top has around a seventy five percent
reliability rate that's pretty good and the double bottom seventy eight and a
half let's say approximately reliability rate that's pretty good so the double
top you've got the price action rising and then it hits a resistance level once
and then again a second time and then breaks down and then you've got these
are reversal patterns by the way not continuation patterns reversal patterns
and then the double bottom I like that one alright so the price action is
falling but then it hits a support level and then hits it bounces right off of it
and then hits it again bounces right off of it I like that a lot that seems to be
a stronger resistance I'm sorry support level stronger support
level when it hits it more than once and the more times it hits it the more times
it bounces off of that support level the more confident I am that it's a really
solid support level all right so that's the double bottom pattern when it breaks
out after hitting that support twice number three remember how I just talked
about when the support and resistance has been bounced off of
more times that gives me more confidence that it's a solid support or resistance
level well therefore the triple bottom and triple top should be more reliable
than just the double bottom at top right well here's the proof here's the
evidence I mean not proof but according to this article
all right the triple top pattern according to the article has a around a
seventy seven and a half percent reliability rate and the triple bottom
which I like a whole lot as far as patterns go has a seventy nine percent
reliability rate Wow so that's number three okay
triple top pattern it's rising price action but hits resistance it hits its
head on that ceiling three times that's some solid resistance there and then it
breaks down it's a reversal price pattern then the triple bottom I like
this one a lot where it hits that support it falls then it hits that
support level bounces right off of it once twice in three times and then
breaks out that gives me a lot of confidence number two
interesting the bullish rectangle pattern with a around a seventy eight
percent reliability rate and the bearish rectangle pattern seventy nine and a
half or there abouts reliability rate Wow okay so it's kind of interesting it
gets into it price is rising with the bullish one it's a continuation pattern
by the way price is rising and then goes into a channel for quite a while at kind
of a long time once twice three times and then finally breaks out you can do
it bearish as well price goes downs falling gets into a channel okay it's
got a support level one to three times but then breaks down finally what's
number two that I'm sorry that was number two you ready for number one here
it is alright head and shoulders and the
inverse inverted Head and Shoulders pattern that's number one
interesting okay what would you have thought this would be number one
that this would be the most reliable one according to the data well there it is
according to this article 80 through eighty three percent reliability rate
that's very reliable according to the article at least okay
so if you don't know what the Head and Shoulders pattern is it's a reversal
pattern okay price action Rises goes down rises more
goes down Rises about to where it rose that first time and then finally breaks
down that's the Head and Shoulders pattern around 83 percent reliable as is
the more bullish that was a bearish one the bullish inverted Head & Shoulders
pattern it's also a reversal pattern price action Falls goes up it's
resistance goes down more goes up hits resistance goes down about as much as it
went down the first time and then breaks out finally
interesting okay so you're ready for the dishonorable mentioned the one that this
article found to not be reliable dishonorable mentioned bullish pennant
pattern and the bearish pennant pattern it's a continuation pattern barely above
fifty percent in the reliability percentage rate according to the article
not too good okay and poor performance comparatively
poor performance it says here Wow and there's the there's the bearish pennant
so you may want to avoid that one and here's the author Cody hind founder and
head trader at samurai Trading Academy at least back when this article was
written and I hope he still is okay pretty cool so thank you to Cody high
and thank you to samurai training academy for providing this information I
want to give you a lot of credit and feel free to check out their website I
am NOT a sponsor of them at the moment but so I'm not being paid to say this I
just thought it's pretty cool that they did all that research okay so if you
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when they come out and leave a comment what do you think do you think this
article is you know do you agree with it do you disagree with it I want to know
what you think all right and I also provide coaching so if you want some
help with trading and investing that kind of thing you can email me at David
Modell at gmail.com thanks a lot I appreciate it I'll talk to you again
soon