TECHNICALS // TRENDLINES // TVT LEARNING MODULE
THEVALUETRADER RESEARCH
INTERACTIVE GUIDE
REF: TRENDLINES / CHANNELS

Trendlines

How to draw trendlines, test them, and understand a break

The central thread of this guide

You need two points to draw a line. A third touch is the first sign that price may respect it. The line shows the speed of a move, not its future direction.

Think of it like this: a trendline shows how quickly price has been rising or falling. If price breaks the line, the move has slowed or changed speed. It does not automatically mean price will reverse.

What you'll learn
  • How to draw a trendline with two points.
  • Why a third touch makes the line more useful.
  • What a break means, and what it does not mean.
  • How your chosen points and chart settings affect the line.
φ 00Start Here

The Short Version

The short version

A trendline is a sloping line drawn on a price chart. It helps you see whether price is moving up or down at a similar speed.

  • A rising trendline is drawn beneath a series of rising lows.
  • A falling trendline is drawn above a series of falling highs.
  • The line moves with time. It is dynamic, not fixed.
  • Two points are enough to draw the line.
  • A later third touch is the first real test of the line.
  • A break shows that price is no longer moving at the same speed.
  • A break on its own does not prove the trend has reversed.
The central principle of this guide
A trendline break signals a change in pace, not automatically a change in direction.

Observation, Interpretation, Confirmation

Use these three simple steps. First, describe what happened. Then explain what it may mean. Finally, wait for price to confirm or reject that idea.

1. Observation
What happened? Example: price closed below the trendline.
2. Interpretation
What might it mean? Example: the rise may be slowing down.
3. Confirmation
What happens next? Does price stay below the line, return above it, or begin a real reversal?

One break is an observation, not a final answer.

How to Use This Guide

Most sections include an interactive chart. If you are a beginner, choose Step by step and use the Next button. Each step adds one new idea and tells you where to look.

Step by step
Shows one idea at a time. Best for beginners.
Overview
Shows the complete chart at once.
Watch for this
Tells you exactly where to look.
Why it matters
Explains what the new chart element means.
Play
Moves through the steps automatically.
Previous / Next
Moves one step backward or forward.
Restart
Returns to the first step.
Speed
Changes the playback speed. Choose Slow if you need more reading time.

On a narrow screen, a diagram wider than the visible area can be scrolled sideways. A hint appears directly above any diagram where that's the case.

φ 01How to read this page

Legend and How to Read These Charts

Every chart on this page is a simple example. It does not show real prices and it is not a forecast. Focus on the shape, not the numbers.

Two things are true of every chart on this page, and of almost every price chart you will ever see:

  • Time runs left to right. The left edge is the past, the right edge is the most recent bar. Anything drawn to the right of where price currently is describes time that has not happened yet.
  • Higher on the chart means a higher price. When the dark line climbs, price went up. When it falls, price went down.
Price path
Dark line. This represents price moving through time.
Trendline
Solid blue. The line drawn through the chosen anchor points. Round markers show the anchors.
Extension
Dashed blue. This extends the trendline into the future.
Break
Red line or label. This shows where price crossed the trendline.
Highlight ring
Dashed circle. Look inside it to find the focus of the current step.
Callout box
White box with a blue outline. This gives a short explanation.
Important

Colour is never the only way to tell things apart. Every element also carries a text label and its own line style or marker shape.

φ 02Core Idea

What a Trendline Actually Is

A trendline connects important highs or lows and shows the speed of a price move.

In an uptrend, draw the line below the rising lows. In a downtrend, draw it above the falling highs. Then extend the line to the right.

The extended line gives you a moving reference level. Unlike horizontal support or resistance, its price changes over time.

Common Mistake · The two-point problem

Any two points can create a line. So two touches do not prove that price respects it. A third touch is the first real test, but it is still not a guarantee.

Key takeaway
Two points construct a line; the third touch provides the first evidence.
φ 03Explanation

Uptrend Lines and Downtrend Lines

The two directions are mechanically identical, just mirrored. An uptrend line connects rising lows and sits beneath price. A downtrend line connects falling highs and sits above it.

  • An uptrend line is drawn under a sequence of higher lows. It is only meaningful while those higher lows are actually forming.
  • A downtrend line is drawn over a sequence of lower highs, on exactly the same logic.
  • Both are dynamic: unlike a horizontal level, the price of the line changes every bar. A level that was support last week is at a different number this week.
  • A line drawn across a sideways range is not a trendline. If there is no sequence of rising lows or falling highs, there is nothing for the line to describe.
φ 04Explanation

Which Points Do You Connect?

Two people can draw different trendlines on the same chart. The reason is simple: they may choose different points, called anchors.

The main conventions

  • Wicks: connect the highest or lowest tips of the candles. This includes every short price spike.
  • Bodies: connect the candle bodies and ignore the wicks. This focuses on where price opened and closed.
  • Zone: use the area between the wick line and body line. This is less exact, but often more realistic.

There is no single perfect method. Choose one before the trade and use it consistently. Do not redraw the line just because the result is inconvenient.

Key takeaway
Anchors, wick/body convention, scale and break rule must be chosen in advance.
φ 05Example

Slope, Sustainability and the Fan Principle

A very steep trendline is hard for price to follow for long. That is why steep lines often break early. A break may only mean the move is slowing down.

A fan forms when one steep line breaks and a flatter line replaces it. This can happen several times. Each new, flatter line shows that momentum is slowing.

The key distinction

In the example, every new low is still higher than the previous low. The uptrend structure is therefore still intact, even though three trendlines broke.

Common Mistake · Angles are not real

The angle changes when you zoom or resize the chart. Do not judge a trendline by an exact number of degrees. Compare it with earlier moves on the same chart.

φ 06Explanation

Channels

A channel uses two parallel lines. Draw one trendline, copy it, and place the copy on the opposite side of price.

  • The lower boundary in an uptrend is the trendline itself, drawn through the rising lows.
  • The upper boundary is the parallel copy, anchored on the intervening high.
  • The optional midline simply marks the middle of the channel.
  • If a rally fails to reach the upper line, the uptrend may be losing strength.
  • Price can briefly move outside the channel. The lines are guides, not walls.
φ 07Core Idea

Breaks, Retests and Failed Breaks

Back to the central thread
The central principle, in full
A trendline break primarily signals a change in pace, not necessarily a change in direction.

A break happens when price crosses the trendline according to your chosen rule. It shows a change in speed. You still need later price action to confirm whether the direction has also changed.

Key takeaway
A trendline measures pace.

Defining "broken"

Choose what counts as a break before it happens:

  • Any trade through the line: earliest signal, most false ones.
  • A close beyond the line: the usual compromise. Price has to settle on the other side, not merely tag it.
  • Follow-through beyond the line: a subsequent bar or swing has to extend the break. Fewest false signals, latest confirmation.

A retest happens when price returns to the broken line and then moves away again. A failed break happens when price crosses the line but quickly returns to the previous side. Neither outcome is guaranteed.

Key takeaway
A break does not automatically confirm a reversal.
φ 08Practical Rule

Linear Versus Logarithmic Scale

The chart scale changes how a trendline looks. On a linear scale, equal distances mean equal price changes. On a logarithmic scale, equal distances mean equal percentage changes.

Practical guidance

Use a log scale for long periods or very large price moves. For short periods with small price changes, both scales often look similar. Always note which scale you used.

φ 09Core Idea

Trendline Pattern Atlas

Chart patterns are shapes that appear repeatedly in price charts. A shape is only a possible setup, not an automatic buy or sell signal. What must price do next to confirm it?

  • A pattern can be recognised before it is fully confirmed.
  • A similar shape can mean something different in a different context.
  • Trendlines depend on anchor points, wick/body convention, scaling and the chosen break rule.
  • A clean textbook drawing says nothing about statistical reliability.
  • Pattern targets are conventions, not guaranteed price objectives.
  • Volume is not used in this guide, since no real volume data is shown.
  • All diagrams below are schematic and contain no real price data.

Filter by family

14 of 14 patterns shown.

Ascending triangle schematic diagram A roughly flat resistance line at the top with a series of rising swing lows beneath it, converging toward the resistance line, with a small green tick above resistance marking a possible breakout. resistance rising lows
Triangles & Compression
Ascending Triangle
Traditionally bullish

Price keeps reaching the same ceiling while each pullback stops higher than the one before.

Study this pattern
What it is
A triangle bounded by a roughly horizontal resistance line above and a rising trendline below, formed as buyers accept progressively higher prices against one repeated ceiling.
How it is drawn
The lower boundary is an ordinary uptrend line through rising swing lows; the upper boundary connects two or more swing highs clustering near the same level.
Typical context
Often watched for after an advance, as a pause where the earlier trend may be gathering for another push, though it can also form after a decline.
What traders watch
Whether each pullback keeps arriving higher than the last, and how price behaves as it presses repeatedly into the flat resistance line.
Possible confirmation
Traditionally interpreted as strengthening the bullish reading if price closes above resistance with some follow-through; different traders use different follow-through rules.
What weakens the reading
A pullback that undercuts the prior low breaks the rising-lows structure; a decisive close back below the rising trendline is equally telling.
Often confused with
A rising wedge, which looks similar but has a rising resistance line instead of a flat one, and traditionally carries a different reading.
Trendline lesson
The rising boundary is only meaningful while higher lows keep forming; a break of it says the pace of buying pressure slowed, not that resistance will resolve any particular way.
Important caveat
A close above resistance is an observation, not a guarantee of continuation. Context and the chosen break rule still decide what happens next.
Descending triangle schematic diagram A flat support line at the bottom meeting a single straight descending resistance line at an apex on the right, with a zigzag price path bouncing cleanly between the two, narrowing toward the apex, then a red break below support. support falling highs
Triangles & Compression
Descending Triangle
Traditionally bearish

Price keeps finding support at the same floor while each bounce stops lower than the one before.

Study this pattern
What it is
A triangle bounded by a roughly horizontal support line below and a falling trendline above.
How it is drawn
The upper boundary is a downtrend line through falling swing highs; the lower boundary connects two or more swing lows clustering near one level.
Typical context
Often watched for after a decline, as a pause that may precede a resumption of selling, though it can also appear after an advance.
What traders watch
Whether each rally keeps arriving lower than the last, and how price behaves as it presses repeatedly into flat support.
Possible confirmation
Traditionally interpreted as strengthening the bearish reading if price closes below support with some follow-through.
What weakens the reading
A rally that exceeds the prior high breaks the falling-highs structure; reclaiming the falling trendline from below is an early sign the reading may not hold.
Often confused with
A falling wedge, which has a falling support line instead of a flat one, and often carries a different traditional interpretation.
Trendline lesson
The falling boundary above describes a slowing pace of rallies; its break says pace changed, not that flat support underneath must give way.
Important caveat
A flat support line being watched by many participants does not make a break or a hold more likely on its own.
Symmetrical triangle schematic diagram A falling resistance line and a rising support line converging toward an apex on the right, with no colour-coded break shown since the pattern has no built-in direction. apex falling resistance rising support
Triangles & Compression
Symmetrical Triangle
Context dependent

Falling highs and rising lows squeeze price into a smaller area. The shape alone does not predict the breakout direction.

Study this pattern
What it is
A compression pattern where both boundaries slope toward each other: resistance falls, support rises, and the range narrows over time.
How it is drawn
A downtrend line through the falling highs and an uptrend line through the rising lows, converging toward an apex.
Typical context
Can appear within an uptrend, within a downtrend, or within a sideways range. The surrounding context is what most traders weigh before forming an opinion.
What traders watch
Which boundary price presses against more persistently as the range narrows, and whether volatility contracts as the apex approaches.
Possible confirmation
A close beyond either boundary may support a reading in that direction; some traders discount breaks that occur very close to the apex, where the pattern is losing definition anyway.
What weakens the reading
A break well before the apex, or repeated false breaks in both directions, both undercut confidence in any single interpretation.
Often confused with
A broadening wedge, which widens rather than narrows, and an ascending or descending triangle when one boundary is close to flat.
Trendline lesson
The clearest illustration in this atlas that a shape is not a signal: this pattern is not automatically bullish or bearish, and the eventual break is the observation worth watching, not the compression itself.
Important caveat
Treating a symmetrical triangle as inherently biased in one direction is one of the most common misreadings of this pattern family.
Bear Flag Bear flag schematic diagram A steep decline (the flagpole), then a small zigzag boxed cleanly between two parallel, mildly rising lines (the flag), then a red break below the flag continuing the decline. flagpole flag break
Bull Flag Bull flag schematic diagram A steep advance (the flagpole), then a small zigzag boxed cleanly between two parallel, mildly falling lines (the flag), then a green break above the flag continuing the advance. flagpole flag break
Flags & Wedges
Bull Flag / Bear Flag
Continuation

A strong move is followed by a short pause that slopes slightly against it. Traders watch for the original trend to continue.

Study this pattern
What it is
Two parts: a sharp initial move (the flagpole) and a short, gently sloped consolidation against it (the flag), rising slightly in a bear flag, falling slightly in a bull flag.
How it is drawn
Parallel trendlines bound the consolidation itself; the flagpole is measured from where the sharp move began to where the consolidation starts.
Typical context
Traditionally watched for after a strong, fast move, on the idea that the flag is a brief pause rather than a change of opinion.
What traders watch
Whether the consolidation stays shallow and brief relative to the flagpole, and whether momentum contracts during the pause where that is visible.
Possible confirmation
Traditionally interpreted as supporting continuation if price breaks the flag's boundaries in the same direction as the flagpole, with some follow-through.
What weakens the reading
A consolidation that runs long, deep, or choppy starts to look more like a reversal structure than a brief pause.
Often confused with
A wedge, when the flag's boundaries converge rather than stay roughly parallel, or a small channel if the flagpole itself is unclear.
Trendline lesson
The flag's boundaries are short-lived trendlines by construction; watching for their break to gauge a resumption of pace is a direct application of the pace-versus-direction distinction running through this guide.
Important caveat
Not every brief pause after a move is a flag, and the label should not be treated as forecasting that the prior move resumes at the same speed.
Rising wedge schematic diagram A rising zigzag boxed between a steep lower boundary and a gentler upper boundary, narrowing toward an apex on the right, then a red arrow breaking down below the lower boundary.
Flags & Wedges
Rising Wedge
Context dependent

Price rises between two lines that move closer together. The pattern is often seen as bearish, but context matters.

Study this pattern
What it is
Both boundaries slope upward, with the upper boundary rising more gently than the lower one, so the range narrows while the whole structure still climbs.
How it is drawn
An upper trendline through the rising highs and a lower trendline through the rising lows, converging toward an apex ahead.
Typical context
Discussed both as a reversal signal after an advance and, less commonly, as a continuation structure within a downtrend. Context materially changes which reading is more traditional.
What traders watch
Whether the advances keep getting weaker as the wedge narrows, and how price behaves once it reaches the lower boundary.
Possible confirmation
Traditionally interpreted as supporting a bearish reading if price closes below the lower, rising trendline.
What weakens the reading
A wedge that keeps expanding instead of narrowing is not a wedge at all, and strong continuation higher after the presumed break undercuts the reading entirely.
Often confused with
An ascending triangle, if the upper boundary is close to flat, and an ascending broadening wedge, if the boundaries widen instead of narrow.
Trendline lesson
Both boundaries are ordinary trendlines; the lower one demands sustained higher lows to hold, and its break says that pace failed, not automatically that the broader trend has reversed.
Important caveat
"Rising wedge" is often used loosely for any narrowing upward move; the traditional bearish association depends on context and the actual break, not the shape alone.
Falling wedge schematic diagram A falling zigzag boxed between a steep upper boundary and a gentler lower boundary, narrowing toward an apex on the right, then a green arrow breaking up above the upper boundary.
Flags & Wedges
Falling Wedge
Context dependent

Price falls between two lines that move closer together. The pattern is often seen as bullish, but context matters.

Study this pattern
What it is
Both boundaries slope downward, with the lower boundary falling more gently than the upper one, so the range narrows while the structure still declines.
How it is drawn
An upper trendline through the falling highs and a lower trendline through the falling lows, converging toward an apex ahead.
Typical context
Discussed both as a reversal signal after a decline and as a continuation structure within an uptrend, on the same logic as the rising wedge.
What traders watch
Whether the declines keep getting shallower as the wedge narrows, and how price behaves once it reaches the upper boundary.
Possible confirmation
Traditionally interpreted as supporting a bullish reading if price closes above the upper, falling trendline.
What weakens the reading
Continued expansion instead of narrowing, or a decisive continuation lower after the presumed break, both undercut the reading.
Often confused with
A descending triangle, if the lower boundary is close to flat, and a descending broadening wedge, if the boundaries widen instead of narrow.
Trendline lesson
Same mechanic as the rising wedge in mirror image. The upper boundary demands sustained lower highs to hold, and its break says that pace failed.
Important caveat
As with the rising wedge, the bullish association is conventional rather than guaranteed, and depends on the surrounding trend and the actual break.
Ascending broadening wedge schematic diagram Two diverging boundaries that both slope generally upward while the swings between them grow larger over time. widening Descending broadening wedge schematic diagram Two diverging boundaries that both slope generally downward while the swings between them grow larger over time. widening
Flags & Wedges
Ascending / Descending Broadening Wedge
Context dependent

The swings grow wider while the whole pattern leans in one direction. Price can still break either way.

Study this pattern
What it is
Two trendlines that diverge over time while both generally sloping upward (ascending) or downward (descending), unlike a standard narrowing wedge.
How it is drawn
An upper trendline through progressively higher highs and a lower trendline through progressively lower relative lows (ascending version), or the mirrored construction sloping down.
Typical context
Associated with increasingly volatile, indecisive trading within a broader move, where swings are growing larger rather than settling down.
What traders watch
Whether each new swing genuinely extends beyond the previous one on both sides, which is what separates this from an ordinary wedge or channel.
Possible confirmation
A break in either direction may support a reading, since the widening structure does not by itself favour one outcome over the other.
What weakens the reading
A structure that stops widening and starts contracting has effectively left this pattern family for something else, most often a symmetrical triangle or channel.
Often confused with
A rising or falling wedge, which narrows rather than widens, and a megaphone or broadening formation, which differs mainly by lacking a directional tilt.
Trendline lesson
With two widening boundaries, "the trendline" is really two weaker constructions: more room between touches means less precision about where a genuine break actually occurs.
Important caveat
The directional tilt in the name describes the shape, not a forecast; broadening structures are traditionally treated as less reliable for direction than narrowing ones.
Bearish megaphone / broadening formation schematic diagram A roughly symmetrical widening structure, with an upper boundary rising and a lower boundary falling at a comparable rate. both boundaries diverge
Flags & Wedges
Bearish Megaphone / Broadening Formation
Context dependent

The highs rise and the lows fall, so price swings become wider. The shape does not predict a direction by itself.

Study this pattern
What it is
A broadening formation where the upper boundary rises and the lower boundary falls at a comparable rate, so the range grows wider over time.
How it is drawn
A trendline through the rising highs and a separate trendline through the falling lows, diverging rather than converging.
Typical context
Often discussed after an extended advance, where it is sometimes associated with distribution, though broadening formations occur in other contexts too.
What traders watch
Whether each swing genuinely exceeds the prior one on its respective side, and whether the widening eventually stalls.
Possible confirmation
A break of either boundary may support a directional reading, though because both boundaries are moving apart, some traders wait for the widening to stop first.
What weakens the reading
Swings that fail to reach the prior extreme on either side suggest the widening has stopped, which changes the structure into something else.
Often confused with
An ascending or descending broadening wedge, which shares the widening logic but adds a directional tilt; naming also varies between sources.
Trendline lesson
Two diverging trendlines are individually weaker than a single well-touched line. The added distance between touches makes both boundaries easier to pierce without much meaning.
Important caveat
Despite the name being common in some sources, broadening formations can resolve in either direction, and the label itself is not a forecast.
Double top schematic diagram Two similar highs separated by a pullback to an intervening low, with a horizontal neckline and a red marker where price closes below it. neckline high 1 high 2
Tops & Bottoms
Double Top
Traditionally bearish

Price forms two similar highs with a low between them. The pattern is not confirmed until that middle low breaks.

Study this pattern
What it is
Two swing highs at a similar level, separated by a pullback to an intervening low, sometimes called the neckline.
How it is drawn
A horizontal or near-horizontal reference line connects the two highs; a second, lower reference marks the intervening low.
Typical context
Traditionally watched for after an extended advance, though two similar highs can occur in other contexts too.
What traders watch
Whether the second high fails to meaningfully exceed the first, and how price behaves as it approaches the neckline on the subsequent decline.
Possible confirmation
Traditionally considered confirmed only once price closes below the neckline, sometimes with a requirement for follow-through afterward.
What weakens the reading
A second high that clearly exceeds the first breaks the "double" structure, and a decline that stalls well above the neckline never confirms the reading at all.
Often confused with
A triple top, if a third similar high forms, or an ordinary consolidation range.
Trendline lesson
The neckline acts like a horizontal support trendline; its break says the intervening low's pace of support failed, traditionally read as bearish rather than certain.
Important caveat
A double top is not established by the second high alone. Before the neckline breaks, it is only a possible double top.
Double bottom schematic diagram Two similar lows separated by a rally to an intervening high, with a horizontal neckline and a green marker where price closes above it. neckline low 1 low 2
Tops & Bottoms
Double Bottom
Traditionally bullish

Price forms two similar lows with a high between them. The pattern is not confirmed until that middle high breaks.

Study this pattern
What it is
Two swing lows at a similar level, separated by a rally to an intervening high, the neckline.
How it is drawn
A horizontal or near-horizontal reference line connects the two lows; a second, higher reference marks the intervening high.
Typical context
Traditionally watched for after an extended decline, though the shape can occur in other contexts.
What traders watch
Whether the second low fails to meaningfully undercut the first, and how price behaves as it approaches the neckline on the subsequent advance.
Possible confirmation
Traditionally considered confirmed only once price closes above the neckline, sometimes with a requirement for follow-through.
What weakens the reading
A second low that clearly undercuts the first breaks the structure, and an advance that stalls well below the neckline never confirms it.
Often confused with
A triple bottom, if a third similar low forms, or an ordinary range.
Trendline lesson
The neckline acts like a resistance trendline; its break says the intervening high's pace of resistance failed.
Important caveat
A double bottom is only a possible double bottom before the neckline breaks. The shape alone does not establish it.
Triple top schematic diagram Three equal highs, each marked Top, separated by two pullbacks to a shared support line. After the third high, price breaks below support while a dashed guide projects the same height downward to a marked Target. Top Top Top Target
Tops & Bottoms
Triple Top
Traditionally bearish

Price tests the same resistance area three times. Confirmation still requires a break below the lows between the peaks.

Study this pattern
What it is
Three swing highs clustered near the same level, separated by two pullbacks to a shared or similar support reference.
How it is drawn
A horizontal reference line connects the three highs; the intervening pullback lows mark the support reference, sometimes drawn as a zone.
Typical context
Traditionally watched for after an extended advance, on the same basis as a double top but with one additional test of resistance.
What traders watch
Whether each successive high continues to fail near the same level, and whether the pullback lows are holding or gradually eroding.
Possible confirmation
Traditionally considered confirmed once price closes below the shared support reference, the same way as a double top's neckline.
What weakens the reading
A third high that clearly exceeds the first two changes the picture entirely, and support lows that keep drifting higher weaken the "shared level" reading.
Often confused with
A double top, before the third high has formed, and a rectangle or range, if the highs and lows are simply a broader sideways structure.
Trendline lesson
The extra test provides one more touch on the resistance level, the same sense in which a third touch strengthens any trendline: more attention, not more certainty about direction.
Important caveat
An additional test of resistance is not proof the level will finally hold; it is one more observation to weigh alongside everything else.
Triple bottom schematic diagram Three equal lows, each marked Bottom, separated by two rallies to a shared resistance line. After the third low, price breaks above resistance while a dashed guide projects the same height upward to a marked Target. Bottom Bottom Bottom Target
Tops & Bottoms
Triple Bottom
Traditionally bullish

Price tests the same support area three times. Confirmation still requires a break above the highs between the lows.

Study this pattern
What it is
Three swing lows clustered near the same level, separated by two rallies to a shared or similar resistance reference.
How it is drawn
A horizontal reference line connects the three lows; the intervening rally highs mark the resistance reference.
Typical context
Traditionally watched for after an extended decline, on the same basis as a double bottom but with one additional test of support.
What traders watch
Whether each successive low continues to hold near the same level, and whether the rally highs are holding or gradually eroding.
Possible confirmation
Traditionally considered confirmed once price closes above the shared resistance reference.
What weakens the reading
A third low that clearly undercuts the first two changes the picture, and resistance highs that keep drifting lower weaken the "shared level" reading.
Often confused with
A double bottom, before the third low has formed, and a rectangle or range.
Trendline lesson
The same logic as a triple top, mirrored: an additional touch on the support level, not additional certainty about direction.
Important caveat
As with the triple top, an extra successful test of a level does not guarantee that level continues to hold going forward.
Cup and handle schematic diagram A rounded, saucer-shaped recovery back toward its starting level, followed by a small consolidation (the handle) and a green tick marking a possible breakout. cup handle
Rounded & Compound
Cup and Handle
Continuation (traditionally bullish)

Price forms a rounded base, then a smaller pullback called the handle. Traders watch for a breakout above resistance.

Study this pattern
What it is
A rounded, saucer-shaped basing structure (the cup) that recovers back toward its starting level, followed by a shorter, shallower consolidation (the handle) before any presumed continuation.
How it is drawn
A curved reference traces the cup's rounded low; a separate, smaller channel or trendline pair frames the handle near the cup's right-hand rim.
Typical context
Traditionally watched for after an advance that paused and rounded rather than reversing sharply, distinguishing it from a V-shaped recovery.
What traders watch
Whether the cup's recovery genuinely approaches its starting level, and whether the handle stays shallow and brief rather than turning into a deeper decline.
Possible confirmation
Traditionally interpreted as supporting continuation if price closes above the handle's upper boundary, near the level of the cup's original rim.
What weakens the reading
A handle that drifts well below the cup's midpoint starts to look like a fresh downtrend rather than a brief pause.
Often confused with
An ordinary rounding bottom without a handle, a simpler and related but distinct structure; not every rounded base has a qualifying handle. The inverted mirror, sometimes called an inverse cup and handle, applies the same logic to a rounded top followed by a small upward handle before a presumed decline.
Trendline lesson
The handle behaves like a small flag or brief consolidation, and the same pace-versus-direction distinction applies to its boundary break as to any other trendline.
Important caveat
Not every rounded consolidation qualifies as a cup and handle: the handle is a specific, secondary requirement, not an optional detail.
Dead cat bounce schematic diagram A rising staircase into a peak, a sharp decline, a small circled bounce partway down, and a red continuation of the decline afterward. bounce Inverted dead cat bounce schematic diagram A falling staircase into a trough, a sharp advance, a small circled pullback partway up, and a green continuation of the advance afterward. pullback
Reversal & Failure
Dead Cat Bounce (and Inverted)
Context dependent

A short recovery happens inside a larger downtrend. At first, it can look exactly like a real reversal.

Study this pattern
What it is
A short-lived rally that interrupts a larger decline before the decline resumes, or its mirror: a short-lived pullback that interrupts a larger advance before the advance resumes.
How it is drawn
The bounce, or pullback, is measured against the trendline or pace of the larger move it interrupts, rather than analysed as a stand-alone shape.
Typical context
Discussed after a sharp decline, or advance, once a partial recovery is already underway, which is exactly what makes the label difficult to apply with confidence at the time.
What traders watch
Whether the recovery stays partial and brief relative to the prior move, and whether the original trendline or pace reasserts itself afterward.
Possible confirmation
Traditionally, the label is really only confirmed in hindsight, once the larger decline or advance has clearly resumed beyond the bounce.
What weakens the reading
A "bounce" that keeps extending, breaks the prior trendline convincingly, and does not give way again is evidence against the reading, not a delayed confirmation of it.
Often confused with
An ordinary retest or a genuine reversal: from the moment the bounce begins, all three can look identical.
Trendline lesson
A direct illustration of why a break must be confirmed rather than assumed: a small recovery inside a larger decline says only that pace paused, and naming it before it resolves is calling the direction, not observing it.
Important caveat
This label should not be asserted from a small recovery alone; by the time it is confirmed, the useful window for calling it in advance has usually passed.
φ 10Explanation

Patterns That Look Similar

Some patterns look very similar. Focus on the lines and the earlier price move, not only on the pattern name.

Ascending Triangle vs. Rising Wedge
  • Ascending triangle: a relatively flat resistance line meets a series of rising lows.
  • Rising wedge: both boundaries rise and converge toward each other.
  • Triangle: the top line is flat. Wedge: both lines rise.
  • Neither pattern is confirmed until price breaks the relevant line.
Double Top vs. Triple Top
  • A double top has two similar highs separated by one pullback.
  • A triple top adds a third high and a second pullback at a similar level.
  • Both use the same rule: neither is confirmed until price closes below the shared low.
Broadening Wedge vs. Megaphone
  • Both show swings that grow larger over time rather than settling down.
  • A broadening wedge leans up or down. A megaphone is usually more balanced.
  • Different traders may use these names differently. Focus on the widening swings.
Double Bottom vs. Triple Bottom
  • A double bottom has two similar lows separated by one rally.
  • A triple bottom adds a third low and a second rally at a similar level.
  • Both use the same rule: neither is confirmed until price closes above the shared high.
Rounding Bottom vs. Cup and Handle
  • A cup and handle needs a rounded base and then a smaller pullback.
  • A rounding bottom has no required handle.
  • A rounded shape alone is not automatically a cup and handle.
Dead Cat Bounce vs. Confirmed Reversal
  • At first, a bounce is only a short recovery inside a downtrend.
  • A reversal needs more evidence, such as higher highs and higher lows.
  • Do not mistake a short pause for a real change in direction.
Double Top vs. Unfinished Range
  • Two similar highs on their own do not confirm a double top.
  • The low between them is called the neckline. Until it breaks, price may simply be moving sideways.
  • Treat it as a possible double top until price breaks the neckline.

From Drawing to Confirmation

The same sequence applies to every pattern in this atlas, regardless of family:

Spot a possible shape
Choose your anchor points
Choose what confirms it
Wait for the break or close
Check what price does next
Decide: confirmed, failed or unclear
  • A pattern begins as a hypothesis.
  • A break is an observation.
  • The interpretation follows only afterward.
  • Follow-through, or a failed break, can change the original reading.
  • Don't redraw the lines afterward just to rescue the pattern.
φ 12Common Mistake

Common Misreadings

Common misreadings of trendlines and why they are problematic
MisreadingWhy it is a problem
Treating a two-touch line as evidence Two points always define a line. There is no information in the fit itself. Only the third touch, and what price does when it gets there, tells you anything.
Reading a break as a reversal A break says the rate of advance failed. Very often the higher lows continue and a shallower line takes over. Check the structure before concluding anything about direction.
Redrawing the line until it works There is almost always some anchor pair that makes an inconvenient break disappear. Choosing anchors after seeing the outcome removes any information the line had.
Switching between wicks and bodies mid-analysis Same problem in a different form. The convention has to be fixed before the event you are judging.
Quoting angles in degrees The visual angle depends on chart scaling and window size. A rule expressed in degrees describes your screen, not the instrument.
Drawing trendlines across a range With no sequence of rising lows or falling highs there is nothing to project. The line will be broken repeatedly in both directions and every break will be meaningless.
Ignoring the scale The same anchors produce different lines on linear and log axes, and one can be broken while the other is not. State which axis you used.
Expecting a retest Retests are common but not required. Building a plan that only works if one arrives means missing every move that does not offer one.

Observation, reading, confirmation

Observation: price closed below the line. Interpretation: the rise has slowed. Confirmation: later price action shows whether the break holds or fails. Keep these three steps separate.

φ 13Practical Rule

Quick Reference

The most important trendline rules at a glance:

Where an uptrend line is drawn
Beneath a series of rising lows
Where a downtrend line is drawn
Above a series of falling highs
What constructs the line
Two anchor points, chosen by the analyst
First additional evidence
A later, third touch
A break initially signals
A change in pace
A break does not confirm
A change in direction, by itself
State before you analyse
Anchors, wick/body convention, scale, break rule

Pattern Atlas, in Brief

The same discipline, applied to chart patterns rather than single trendlines:

  • A pattern starts as a hypothesis.
  • Context comes before the pattern name.
  • Boundaries must be drawn consistently.
  • A break is an observation, not a forecast.
  • Confirmation rules must be chosen in advance.
  • Similar-looking patterns can imply different things.
  • Failed patterns can be as informative as successful ones.
  • No pattern guarantees direction or target.

This content is for educational purposes only and reflects my personal perspective and experience using trendlines and related chart techniques. It is not financial advice, investment advice, or a recommendation to buy or sell any security. All graphics are schematic illustrations and contain no real price data. Conventions such as anchor selection, break definitions and the fan principle are practices from technical analysis rather than standardised rules, and usage varies between sources. All investing involves risk, and you are responsible for your own decisions. Always do your own research.

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