Bullish chart patterns signal future price increases and are important to traders, but not all are accurate or profitable. Testing shows triangles, rectangles, double bottoms, and the cup and handle are the most reliable bullish patterns. Traders need to avoid bull pennants and bull flags.
This article details the best bullish chart patterns to use and those you need to avoid.
Bullish chart patterns are technical analysis indicators that signal a potential trend reversal or an upward continuation of a price movement.
Bullish reversal patterns typically form when the market has been in a downtrend and suggest that the market is due for an upturn. Bullish continuation patterns typically occur after an uptrend and signal a future bullish move.
All statistics in this article are sourced with permission from Tom Bulkowski and his excellent book The Encyclopedia of Chart Patterns (Wiley 2021)
1. Bullish Ascending Triangle
The ascending triangle pattern is a reliable bullish continuation pattern popular with knowledgeable traders.
An ascending triangle is a powerful technical analysis pattern with a predictive accuracy of 83%. The pattern is flexible, can break out up or down, and is a continuation or reversal pattern.
An ascending triangle has one inclining trendline that connects a series of higher lows and a second horizontal trendline that connects a series of highs. An ascending triangle can be bearish or bullish or a reversal or continuation pattern, depending on the direction of the price breakout.
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The ascending triangle chart pattern occurs when sellers are in control at the resistance price points. As buyers become more active, demand starts to outstrip supply, and the lows move higher. Eventually, a breakout occurs in either direction, signaling a reversal or continuation of the trend.
2. Cup and Handle Pattern
According to research, the cup and handle is a bullish continuation chart pattern, with an impressive 95% success rate. The pattern consists of two distinct parts: the cup and the handle. The “cup” portion of the pattern forms with a downward move in price, followed by an upward rally that terminates near the price level of where it began. This forms a U-shape or “cup.” The “handle” forms when the price pulls back downward again, usually within a 5-20% range and near the cup’s low before resuming its upward trend.
The cup and handle chart pattern is difficult to identify. First, you will notice a “cup” shape in the chart that forms when an asset’s price rises, then retraces in a long U-shape that forms over at least 30 trading days. Secondly, you will see two declining trendlines forming the “handle.” The handle should be less steep than the cup and last at least five days.
The breakout occurs when the asset’s price breaches the highest point of the cup pattern, which is known as the resistance line – this often indicates that a strong uptrend will occur. Traders look for a strong volume increase to confirm the breakout. After the breakout, you can expect to see a long upward price trend that lasts anywhere from several weeks to several months.
Cup and Handle Pattern: Trading a 95% Reliable Chart Pattern
3. Bull Flag Pattern
A bullish flag is a popular yet widely misunderstood technical analysis pattern characterized by a rapid upward price trend followed by parallel downslope consolidation in price. The price increase resembles a flag pole, while the price consolidation is the flag.
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The bull flag is a continuation pattern that forms during an explosive price increase, followed by a downward price consolidation. The price consolidation is caused by traders profiting from the strong trend taking profits, and looking to short the stock.
Most flag patterns slope in the opposite direction from the previous trend, but some can be horizontal and resemble a rectangle pattern.
There are three flag patterns, the bull flag, the bear flag, and the high-tight bull flag. Research on 1,028 trades shows that standard loose flag patterns have a failure rate of 55%. In contrast, a high tight bull flag pattern has a success rate of 85% with an average gain of +39%.* Source
4. Bullish Wedge Pattern
A falling Wedge is considered a bullish wedge, signaling a potential rally after the price breaks out. A falling wedge is a technical analysis pattern with a predictive accuracy of 74%. The pattern can break out up or down but is primarily considered bullish, rising 68% of the time.
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The falling wedge is formed when an asset price rises, but instead of continuing its upward trajectory, it contracts as the trading range tightens. This contraction is reflected in the slope of two falling and converging trend lines plotted above and below the price action.
Traders should be cautious when they see the falling wedge form. As the price action continues to fall, the trading range tightens, indicating that selling pressure pushes the stock downward. Ultimately there is a 68% chance of an upwards breakout as buyers take control.
5. Bullish Pennant Pattern
A bullish pennant is a popular yet widely misunderstood technical analysis pattern characterized by a period of consolidation in the form of a symmetrical triangle. Generally, this pattern is regarded as a continuation pattern and appears after a sharp rally. It is composed of two converging trendlines connecting highs and lows and followed by a breakout to the upside.
A bullish pennant is a popular yet widely misunderstood technical analysis pattern characterized by a period of consolidation in the form of a symmetrical triangle. Generally, this pattern is regarded as a continuation pattern and appears after a sharp rally. It is composed of two converging trendlines connecting highs and lows and followed by a breakout to the upside.
A bullish pennant is not reliable or accurate, with a 54% success rate on an upside breakout achieving an average 7% profit in bull markets. This pattern’s failure rate is 46%, which must be avoided.
Bull Pennant: Why Traders Lose With Bullish Pennant Patterns
6. Bullish Descending Triangle
A descending triangle is a powerful technical analysis pattern with a predictive accuracy of 87%. The pattern is flexible and can break out up or down, and it is a continuation or a reversal pattern.
A descending triangle has one declining trendline that connects a series of lower highs and a second horizontal trendline that connects a series of lows. A descending triangle can be bearish or bullish or a reversal or continuation pattern, depending on the direction of the price breakout.
The descending triangle chart pattern is considered a reliable continuation or reversal point in the market, with an 87% success rate on an upward breakout in bull markets. This is because buyers begin to take control of the market when the price breaks above the triangle.
7. Bullish Rectangle Pattern
A rectangle is a well-established technical analysis pattern with a predictive accuracy of 85%. The pattern is flexible, can break out up or down, and is a continuation or reversal pattern. A rectangle can be bearish or bullish, depending on the direction of the price breakout.
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This pattern is also known as “rectangle consolidation,” “box,” and “rectangular formation.”
The rectangle chart pattern usually develops after a strong price move, forming a period of consolidation or rest. In some cases, it can also form after a range-bound market or during a period of low volatility.
8. Bullish Triple Bottom
The triple bottom chart pattern is a technical analysis trading strategy in which the trader attempts to identify a reversal point in the market. Traders look for three consecutive low points separated by intervening peaks, creating a “VVV” shape on the price chart.
To identify a triple bottom chart pattern, look for three distinct lows in the security’s price that form a “VVV”-shaped pattern. Generally, the pattern should be visible on an intraday and daily chart. Triple bottoms occur more frequently on 15-minute and hourly charts.
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The triple bottom chart pattern is considered a reliable reversal point in the market, with an 87% success rate in bull markets. This is because buyers begin to take control of the market when the price breaks above the intervening peaks, and the trend could change from bearish to bullish.
9. Bullish Head and Shoulders Pattern
The inverse head and shoulders pattern is an extremely bullish chart formation with a high probability of a strong uptrend. Detailed research shows an inverse head and shoulders chart pattern has an 89% success rate for a reversal of an existing downtrend. With an average price increase of 45%, this is one of the most reliable chart patterns.
The inverse head and shoulders occurs when the price of security hits the bottom three times, with two troughs forming the “shoulders” and the third lower trough forming the “head.” This pattern can indicate that the security’s price could soon begin to move higher.
The inverse head and shoulders has been used for decades as a reliable indicator of potential reversals. The pattern is highly reliable because it requires three tests of the same resistance and a neckline break before it can be considered valid. This increases the accuracy of the signal and improves its reliability.
10. Bullish Double Bottom Pattern
The double bottom chart pattern is a technical analysis trading strategy in which the trader attempts to identify a reversal point in the market. Traders look for two consecutive low points separated by an intervening peak, creating a “W” shape on the price chart.
The double bottom chart pattern is considered a reliable reversal point in the market, with an 88% success rate in bull markets. This is because buyers begin to take control of the market when the price breaks above the intervening peak, and the trend could change from bearish to bullish.
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To identify a Double Bottom chart pattern, look for two distinct lows in the security’s price that form a “W”-shaped pattern. Generally, the pattern should be visible on an intraday and daily chart.
How to Automatically Identify Bullish Chart Patterns?
You can automatically identify bullish patterns using TradingView. Go to TradingView and click Indicators > Technicals > Patterns. Next, select Bullish Patterns. Now, a chart with any bull pattern formations will be clearly marked.
Scanning for Bullish Chart Patterns
There are currently two trading platforms offering bullish chart pattern scanning and screening. TrendSpider and FinViz enable complete market scanning for bullish and bearish patterns. Finviz is a good, fast, and free pattern scanner, whereas TrendSpider enables full backtesting, scanning, and strategy testing for chart patterns.
How to Scan For Bullish Patterns with TrendSpider?
Scanning for bullish patterns with TrendSpider is easy. Visit TrendSpider, select Market Scanner > All of the Following > Chart Pattern > Select Pattern > Scan. You will be presented with a list of stocks with bullish patterns.
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One of the major benefits of using AI-driven technical analysis tools like TrendSpider is the ability to backtest historical data. This allows traders to compare the performance of their strategy over different periods and markets. With TrendSpider, you can go back in time to find stocks exhibiting bullish patterns and then use the platform’s advanced analytics tools to analyze how effective this pattern was for trading at any given time.
How to Scan For Bullish Patterns with FinViz?
FinViz has a great feature for scanning bullish patterns. You can easily find stocks exhibiting this pattern by selecting Screener > Technical > Charts > Pattern > Select Pattern. This is extremely useful to traders who want to monitor potential bull trade opportunities.
Scan for this Chart Pattern with FinViz
FinViz offers a range of pre-defined filters and sorting options, enabling traders to quickly narrow their search by sector, industry, market capitalization, and more. After selecting the desired criteria, traders can apply the filter to the Finviz screener.
Frequently Asked Questions
Is a head and shoulders pattern bullish?
No, according to research, a head and shoulders pattern is a bearish pattern 81 percent of the time. The inverse head and shoulders pattern occurring at the bottom of a bear market is considered extremely bullish, with an 89 percent upside probability.
What are bullish patterns?
Bullish patterns are chart formations indicating that the trend will likely continue upward. Bullish patterns include cup and handle, ascending triangle, double bottom, and triple bottom. These patterns are generally a sign that buyers are entering the market and prices will likely increase.
What is a bullish stock pattern?
Bullish stock patterns are technical analysis patterns that indicate a probable increase in the price of a stock. Investors and traders can use these patterns to identify potential trading opportunities. They include the cup and handle, ascending triangle, double bottom, and inverse head and shoulders.
What is the most bullish chart pattern?
The most bullish chart pattern is the cup and handle, which has an exceptional bullish success rate of 95 percent. With a potential average profit of 54 percent, the cup and handle is the best bull pattern.
Is a bullish pattern good?
Yes, a bullish pattern typically indicates that the stock price is more likely to increase than decrease. This makes them an attractive opportunity for traders and investors looking to capitalize on rising prices. They also offer a favorable risk/reward ratio as they usually have limited downside potential while offering significant upside potential.
How to find bullish patterns?
You can automatically find bullish chart patterns with TradingView's pattern recognition algorithms. If you want to scan entire markets for bearish patterns, I would recommend TrendSpider or Finviz.
Learn the Success Rates of 65 Chart Patterns
The Encyclopedia of Chart Patterns by Tom Bulkowski details the reliability and success rates of 65 chart patterns and shows you how to trade them.
It is an indispensable resource for traders and investors looking to increase their profitability by taking advantage of stock chart patterns. This comprehensive reference book contains in-depth explanations and detailed illustrations of more than 65 different pattern types, including Head and Shoulders, Double Tops, Wedges, Flags, Gaps, and many more.
Complete with decades of chart pattern testing, The Encyclopedia of Chart Patterns is a critical resource for trading success.
