## Pattern – Part 3: Formation of a V, Triangles, Rectangles, Wedges, Flags and Guidons

In this third and last article we finish the discussion about main patterns.

## V-FORMATION

The V-formation is a further inversion figure , also in top or bottom version.

The V-TOP has a growing trend:

• Previous congestion phase and sudden rise in quotations with high volumes
• It is necessary that the slope of the ascent phase is the same as that of descent.

On the other hand, the V-BOTTOM has a decreasing trend:

• Volumes sustained especially in the minimum phase where there is a reversal of the market phase.

In both cases the volumes have the shape of a pyramid or accompany the V.

Below is an example of V-BOTTOM on XRP chart, in about 20 days:

Image 1: Formation of a V-BOTTOM on XRP – 4h TimeFrame

## Triangles

They are continuation figures and are formed as a result of special provisions of maximum and absolute minimum. It is formed in the intermediate phase of the primary trend.

The main features are:

• Volume reduction
• Net identification of support levels

The objectives you can have are:

• In the short term: know where the price will go, seeing where the figure closes
• In the medium term: reversing the amplitude of the previous primary trend (bullish or bearish)

The symmetrical triangle is formed by the contrast of:

• maximum decreasing
• growing minimums

It is characterized on average by decreasing volumes , with a peak that is obtained when the figure is broken or completed.

The rectangle triangle is formed by price fluctuations that decrease in amplitude and which are delimited, in the case of bullish triangles, by a net resistance level, and in the case of bearish triangles, by a net level of support.
The trendline in these cases is almost flat (to be able to draw the base of the right triangle).

The figure is completed when the level of horizontal support / resistance is violated in a clear manner with a simultaneous increase in bargaining

## RECTANGLES

They are a continuation pattern , which is obtained when the demand and supply are balanced.

The price fluctuation therefore occurs in a well-defined range.

It is therefore a horizontal phase of the market, where sooner or later one of the two limits will be violated (or the lower or the upper)

## WEDGE

They can be seen both as figures of continuation of the trend and of inversion .

It is made up of two lines that converge, or tend to do, in one point.

• Falling Wedge : when the two lines that compose it are bearish;
• Rising Wedge : on the contrary when the two lines that compose it are bullish;

Image 2: Formation of a Rising Wedge

The main difference between continuation and inversion wedges is that:

• In case of continuation: the inclination of the wedge is opposite to that of the trend, thus indicating a simple retracement after which the trend resumes its direction;
• In case of inversion: the inclination of the wedge is the same as the trend, so there is an exacerbation of the trend itself until its termination.

## FLAGS AND GUIDES

They are a continuation pattern that is completed in a short time and often occurs in the final phase of the main trend.

They consist of:

• A first phase with a rapid increase in prices and volumes ;
• a second phase with small and frequent price fluctuations, which develop in a narrow amplitude channel.

An important component is the presence of an immediately preceding accumulation area, which is formed at an important level of resistance

Flags have the shape of a descending channel.
The Guidons have the shape of a triangle.

Below is an example of a guide lasting about 3h:

Image 3 : Formation of a guide on XRP – TimeFrame at 15min

## References:

1. Ettore Coliva, Lucio Galati, “ANALISI TECNICA FINANZIARIA”, 1th edizione del 1992, UTET Libreria (Pag 59 – 113)