Chart Patterns is formed when the price of a stock or any security creates a shape. It occurs over a period of time. Chart Patterns is used in Technical Analysis to predict the future direction of a stock price. It can trigger a bullish signal where the price goes up in the future. Or it can trigger a bearish signal where the price goes down.

The problem with Chart Patterns is that it is ambiguous, complicated, and confusing. It can also trigger bad signals. Chart Patterns are like wild animals that cannot be tamed. You think you know what they're going to do. You think you have it right. But then they do something completely different.

Example 1

A Bullish Triangle Pattern accurately predicted DirecTV's stock price to ascend.

Source: Thinkorswim by TDAmeritrade

Example 2

In IBM's chart, there are Bullish and Bearish Chart Patterns appearing. Some of them accurately predicted the direction of the stock price. Some of them did not. They just gave us misdirection.

Source: Thinkorswim by TDAmeritrade

Example 3

A Chart Pattern predicted Goldman and Sachs stock price to head higher. But then the stock price plunged 50% for the year. If we had bought his based on this Chart Pattern analysis alone, we would have lose 50% of our investment.

Source: Thinkorswim by TDAmeritrade