reversal patterns

In last month’s On Trading feature, “Understanding Chart Patterns — Flags and Triangles,” we introduced this topic by focusing on flags and triangles—two of the most common and potentially useful types of continuation patterns. Now, we’ll turn our attention to another group of chart patterns — reversal patterns — and examine two of the most common types: double tops/bottoms and head and shoulders tops/bottoms. We’ll discuss how to identify these types of formations and how traders often use the formations to help measure price targets—and potentially improve their trades.