The stock market is full of random investors jumping on a lucky chance. They probably lose more than they win with that mindset.this is especially penny stocks and its volatility. This is why learning how to buy penny stocks correctly is essential. And learning some of the most important and common chart patterns is a great place to start.
Identifying penny stock chart patterns is essential for a successful trader. Educated traders use these patterns, so they fulfill a kind of self-fulfilling prophecy, but for trading. Nothing is 100% guaranteed, but patterns can help you win more in the market than no pattern. Here are five of the best penny stock chart patterns.
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double top and double bottom chart pattern
What is a double top chart pattern? The double top visually appears in the shape of the letter “M”. This occurs when the stock reaches the resistance point twice her. Nor can it be broken, which usually leads to a stock short. The next trend is usually a sharp price drop.
Ah double bottom chart pattern is the opposite and is shown as “W”. Bouncing off support levels twice in a period of time can lead to a significant increase in the stock price. This is usually because buyers see sellers failing to break through the support line. Or, alternatively, investors see a solid level of support for a particular penny stock.
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Head & Shoulders Chart Pattern
Ah Head and shoulders stock chart pattern. This is a trend reversal pattern. This is shown on the chart by sandwiching the high between two similar previous low highs. The left side of the head and shoulders shows where the market was in a bullish trend. The market shifts in a bearish direction when the chart hits a high. Therefore, this pattern indicates a trend reversal.
golden cross and death cross chart pattern
The golden cross chart pattern occurs when the short timeframe moving average (50 days) crosses the long timeframe moving average (200 days). This crossing is a strong indication that the chart has probably entered a bull market.
The opposite action is known as death cross. This is when the short-term moving average breaks below the long-term moving average. This is usually a solid bear market indicator.
cup and handle chart pattern
The cup and handle pattern is usually visualized as a parabolic “U” shape with a lip to the right of the “U”. This is because the chart hit resistance first and the stock fell. After that, there is a period of consolidation, after which it bounces back to the resistance line again. The chart forms a rip/handle, bullish flag or pennant. Stocks traditionally rise above the resistance line and brace for a bullish breakout.
Ascending and descending triangles
A rising triangle penny chart pattern is seen when a stock’s highs are virtually flat and its lows continue to rise. This happens until the low hits a continuous flat high. When the chart hits this point, it usually shows a strong bullish breakout achieving new highs.
A descending triangle pattern is characterized by the stock price having a flat low while the high rises low until it reaches a flat low. It is possible to establish