Technical Analysis Visual Guide
Mastering Chart Patterns and Indicators for Strategic Trading.
❶ Price Visualization Formats
Line Chart (Closing Price)
Connects the closing prices only, stripping away intraday noise for a pure view of the overall trend direction.
Bar Chart (OHLC)
Each bar defines the period’s Open (left), High (top), Low (bottom), and Close (right). Essential for detailed range and volatility study.
Candlestick Chart (Body & Wicks)
Body shows Open/Close; wicks show High/Low. The most common format for interpreting price action and short-term psychology.
❷ Price Patterns & Non-Time Charts
Head & Shoulders (Bearish)
A classic bearish reversal pattern. Break below the horizontal Neckline is the trade entry signal. A reverse H&S is bullish.
Double Top (Bearish)
The market hits resistance twice, failing to break higher. Confirmation comes when price breaks below the central Neckline/Support level. Double Bottom is bullish.
Ascending Triangle (Bullish)
Flat resistance line and rising support. Price is consolidating, indicating buying pressure that will likely lead to an upward breakout.
Bull Flag (Continuation)
A sharp “Flag Pole” move (impulse) followed by a tight, downward-sloping consolidation channel (Flag). A break above the channel suggests the prior trend will continue.
Falling Wedge (Bullish Reversal)
Price consolidates downwards with converging support and resistance lines. Indicates momentum exhaustion and typically resolves with an aggressive upward breakout.
Cup and Handle (Bullish)
A large, ‘U’ shaped Cup followed by a short, downward-sloping *Handle* consolidation. A strong bullish pattern, with the **breakout** above the cup’s rim signaling a major move.
Renko Charts (Fixed Brick Size)
Focus only on fixed price movements (“bricks”), removing time. Filters noise, making trend reversals and support/resistance crystal clear.
Heikin Ashi (Smooth Trend)
Averages price data to smooth action. A run of green candles with no lower wicks signals a strong, confirmed uptrend.
❸ Core Technical Indicators (Momentum & Volatility)
Trend & Volatility Overlays
- Moving Averages (MA): Shows the average price over a period. Crossovers like the Golden Cross (50-day over 200-day MA) are key entry/exit signals.
- Bollinger Bands (BB): Consist of a middle MA and two outer bands based on standard deviation. Used to identify price extremes and volatility contraction.
- Ichimoku Cloud: A leading indicator that forecasts support/resistance. Price in the Cloud (Kumo) indicates market indecision or range-bound trading.
RSI Divergence (Reversal Warning)
While the price makes a new high, the Relative Strength Index (RSI) makes a lower high. This “Bearish Divergence” is a strong warning that the uptrend’s momentum is weakening and a reversal is imminent.
❹ Advanced Tools & Confirmation
Fibonacci Retracements (Reversal Levels)
Horizontal lines indicating levels where price is likely to find support or resistance after a move. The 61.8% and 50% levels are often the most significant retracement zones.
Volume Analysis (OBV)
Volume is crucial for confirmation. On-Balance Volume (OBV) measures buying/selling pressure. A rising price with falling OBV indicates weakness (divergence) and likely reversal.
- Confirmation: Trend is valid only if volume moves in the same direction as price.
- Divergence: Price hits a new high, but OBV does not (like the graphic) – Strong Reversal Warning.