Noesis
Level 2 — RecallChart Patterns

Chart Patterns

⏱ 30 minutes40 marksprintable — key stays hidden on paper

Subject: Stock-Market | Chapter: 3.5 Chart Patterns Level: 2 — Recall & Standard Problems Time Limit: 30 minutes | Total Marks: 40

Section A — Definitions & Recall (short answer)

Q1. Define a Head and Shoulders pattern. State whether it is a reversal or continuation pattern and in which trend it typically forms. (4 marks)

Q2. Distinguish between a Double Top and a Double Bottom, including the trend each signals and the confirmation trigger for each. (4 marks)

Q3. Name and briefly describe the three types of triangle patterns. State the typical bias (bullish/bearish/neutral) of each. (4 marks)

Q4. Explain the difference between a flag and a pennant, and state whether they are continuation or reversal patterns. (4 marks)

Q5. Describe a Cup and Handle pattern. State what the "handle" represents and the direction of the expected breakout. (4 marks)

Q6. Contrast a rising wedge and a falling wedge in terms of shape and directional implication. (4 marks)

Section B — Standard Problems (measured moves & classification)

Q7. A Head and Shoulders top has a head peak at \120andahorizontalnecklineatand a horizontal neckline at$100$. Calculate the measured move price target after a breakdown. (4 marks)

Q8. A Double Bottom forms with the two troughs at \50andtheresistance(neckline)atand the resistance (neckline) at$62$. Calculate the upside target after a breakout above the neckline. (4 marks)

Q9. A rectangle (range) pattern has support at \80andresistanceatand resistance at$95$. Price breaks upward above resistance. Give the measured-move target, and state what the target would be for a downward break of support. (4 marks)

Q10. Classify each of the following as a reversal or continuation pattern: (a) Inverse Head and Shoulders, (b) Symmetrical Triangle (mid-trend), (c) Triple Top, (d) Bullish Flag. (4 marks)

Answer keyMark scheme & solutions

Q1. Head and Shoulders — (4 marks)

  • A chart pattern with three peaks: a higher central peak (the head) flanked by two lower peaks (the shoulders) of roughly equal height, connected by a neckline drawn across the intervening troughs. (2 marks)
  • It is a reversal pattern. (1 mark)
  • It forms at the top of an uptrend, signalling a change to a downtrend (the inverse version forms at the bottom of a downtrend). (1 mark)

Q2. Double Top vs Double Bottom — (4 marks)

  • Double Top: two peaks at roughly the same price level (an "M" shape); a bearish reversal at the end of an uptrend. Confirmed when price closes below the support/neckline (the trough between the peaks). (2 marks)
  • Double Bottom: two troughs at roughly the same level (a "W" shape); a bullish reversal at the end of a downtrend. Confirmed when price closes above the resistance/neckline (the peak between the troughs). (2 marks)

Q3. Triangle types — (4 marks)

  • Ascending triangle: flat/horizontal upper resistance + rising lower support line → typically bullish. (1.5)
  • Descending triangle: flat/horizontal lower support + falling upper resistance line → typically bearish. (1.5)
  • Symmetrical triangle: converging trendlines (falling highs + rising lows) → neutral, breaks in direction of prevailing trend. (1)

Q4. Flag vs Pennant — (4 marks)

  • Flag: a small rectangular channel sloping against the prior move (parallel trendlines). (1.5)
  • Pennant: a small symmetrical triangle with converging trendlines after a sharp move. (1.5)
  • Both are continuation patterns, appearing after a strong move ("flagpole"). (1)

Q5. Cup and Handle — (4 marks)

  • A rounded "U"-shaped bottom (the cup) followed by a smaller downward drift/consolidation (the handle). (2)
  • The handle represents a short pullback/consolidation before breakout. (1)
  • Bullish continuation; expected upward breakout above the cup's rim/resistance. (1)

Q6. Rising vs Falling Wedge — (4 marks)

  • Rising wedge: both trendlines slope upward and converge; generally bearish (breaks down). (2)
  • Falling wedge: both trendlines slope downward and converge; generally bullish (breaks up). (2)

Q7. H&S measured move — (4 marks)

  • Pattern height = head − neckline = 120 - 100 = \20$. (2)
  • Target = neckline − height = 100 - 20 = \80$. (2)
  • Target = $80.

Q8. Double Bottom target — (4 marks)

  • Height = neckline − trough = 62 - 50 = \12$. (2)
  • Target = neckline + height = 62 + 12 = \74$. (2)
  • Target = $74.

Q9. Rectangle measured move — (4 marks)

  • Range height = 95 - 80 = \15$. (1)
  • Upward break target = 95 + 15 = \110$. (1.5)
  • Downward break target = 80 - 15 = \65$. (1.5)

Q10. Classification — (4 marks) (1 each)

  • (a) Inverse H&S → Reversal
  • (b) Symmetrical Triangle (mid-trend) → Continuation
  • (c) Triple Top → Reversal
  • (d) Bullish Flag → Continuation
[
  {"claim":"H&S target = 80", "code":"head=120; neck=100; result = (neck-(head-neck))==80"},
  {"claim":"Double bottom target = 74", "code":"trough=50; neck=62; result = (neck+(neck-trough))==74"},
  {"claim":"Rectangle up target = 110", "code":"sup=80; res=95; result = (res+(res-sup))==110"},
  {"claim":"Rectangle down target = 65", "code":"sup=80; res=95; result = (sup-(res-sup))==65"}
]