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Technical Analysis: 20 Trading Setups Every Trader Should Know

Learn how to recognize common technical analysis patterns and understand how traders use them to plan potential entries, exits, and risk management.

Technical analysis gives traders a structured way to study price movement, identify important levels, and recognize
patterns that may provide trading opportunities.

From double bottoms and double tops to breakouts, flags, wedges, and candlestick patterns, these 20 technical analysis setups can help you better understand what price may be communicating.

Study the pattern. Understand the setup. Plan the trade.

What Is Technical Analysis?

Technical analysis is the study of price movement and market behavior using charts, price levels, patterns, and other market data.

Support Bounce

A support bounce is a common technical analysis setup that occurs when price reaches an area where buying interest has previously appeared and then begins moving higher.

Support is not necessarily an exact price. It is often better understood as a zone where demand has previously been strong enough to slow or reverse a decline.

How to Trade a Support Bounce

Start by identifying a meaningful support area that price has respected previously. As price approaches that level, watch for evidence that buyers are becoming active.

A potential bullish setup may develop when price tests support, rejects lower prices, and begins moving upward.

Rather than buying immediately when price touches support, traders may wait for additional confirmation that the level is holding.

What to Watch For

A support bounce can fail if sellers push decisively through the support zone, so confirmation and risk management remain important.

Resistance Rejection

A resistance rejection occurs when price reaches an area where sellers have previously appeared and struggles to continue higher.

Resistance can act as a barrier when selling pressure becomes strong enough to prevent price from advancing.

How to Trade a Resistance Rejection

First identify a meaningful resistance area that has previously stopped or slowed an upward move.

When price returns to that area, watch for signs that buying momentum is weakening and sellers are beginning to take control.

A potential bearish setup can develop when price rejects resistance and begins moving lower. Traders may wait for bearish price-action confirmation rather than assuming every resistance test will reverse.

What to Watch For

A strong and sustained break above resistance can invalidate the rejection setup.

Breakout

A breakout occurs when price moves decisively through an important resistance level, trendline, consolidation area, or chart boundary.

A bullish breakout can indicate that buyers have gained enough momentum to push price beyond an area where sellers previously controlled the market.

How to Trade a Breakout

Begin by identifying a clearly defined resistance level that price has struggled to overcome.

Instead of treating every brief move above resistance as a valid breakout, traders may look for confirmation such as strong momentum, a decisive candle close, or a successful retest of the broken level.

A breakout setup becomes more meaningful when price establishes itself above the previous resistance area.

What to Watch For

False breakouts can occur when price briefly moves above resistance before quickly falling back below it.

Breakdown

A breakdown occurs when price moves decisively below an important support level or chart boundary.

This setup can indicate that sellers have gained enough momentum to push price beneath an area where buyers previously provided support.

How to Trade a Breakdown

Start by identifying an important support level that has held price previously.

When price moves decisively below that level, traders may wait for confirmation that the breakdown is genuine.

Some traders also watch for a retest of the broken support area. Previous support can sometimes become new resistance after a confirmed breakdown.

What to Watch For

A breakdown may become a false breakdown if price quickly recovers above the previous support level.

Trend Continuation

A trend continuation setup occurs when price temporarily pauses, consolidates, or pulls back before continuing in the direction of the existing trend.

Markets rarely move in a perfectly straight line, so even strong trends can experience short-term retracements.

How to Trade a Trend Continuation

Begin by identifying the broader market direction.

In an uptrend, traders may wait for price to pull back toward an area of support before looking for renewed bullish confirmation.

In a downtrend, traders may watch for price to recover toward resistance before looking for renewed selling pressure.

The goal is to distinguish a temporary pullback from a genuine trend reversal.

What to Watch For

Double Bottom

A double bottom is a popular bullish reversal pattern used in technical analysis. It often resembles the letter W on a price chart.

The pattern develops when price declines to a low, rebounds, returns toward a similar low, and then attempts to move higher.

The high between the two lows creates an important resistance area commonly called the neckline.

How to Trade a Double Bottom

Look for two distinct lows forming around a similar price area after a decline.

The double bottom becomes more significant when price breaks above the neckline with convincing momentum.

Some traders consider the confirmed neckline breakout, while others wait for price to pull back and retest the broken neckline before evaluating an entry.

What to Watch For

Two similar lows alone do not confirm a double bottom. Price should provide evidence that buyers are gaining control.

Double Top

A double top is a bearish reversal pattern commonly used in technical analysis. It often resembles the letter M on a price chart.

The pattern forms when price reaches a high, pulls back, rallies toward a similar high, and then fails to continue upward.

The low between the two peaks creates the neckline.

How to Trade a Double Top

Identify two distinct highs forming around a similar resistance area.

The setup becomes more meaningful when price breaks below the neckline, suggesting that sellers may be gaining control.

Some traders wait for a confirmed neckline breakdown or a failed retest of the broken neckline before considering the bearish setup confirmed.

What to Watch For

If price breaks decisively above the two highs instead, the bearish double-top setup may be invalidated.

HEAD AND SHOULDERS

The head and shoulders pattern is a widely recognized bearish reversal pattern in technical analysis.

It typically contains three peaks: a left shoulder, a higher central peak called the head, and a right shoulder.

The lows between these peaks form an important support area called the neckline.

How to Trade a Head and Shoulders Pattern

Allow the pattern to develop rather than trying to predict it too early.

The setup becomes more meaningful when price breaks below the neckline.

A confirmed neckline breakdown may indicate that the previous bullish market structure is weakening and that sellers are beginning to take greater control.

What to Watch For

Three peaks alone do not complete a head and shoulders pattern. The neckline break provides an important confirmation signal.

INVERSE HEAD AND SHOULDERS

The inverse head and shoulders is the bullish counterpart to the traditional head and shoulders pattern.

This reversal setup generally develops after a downtrend and contains a left shoulder, a lower central low called the head, and a right shoulder.

The highs between the lows form the neckline.

How to Trade an Inverse Head and Shoulders

First identify whether price is forming the three-part structure after a decline.

The bullish setup gains confirmation when price breaks above the neckline.

Some traders wait for the breakout to hold or for price to retest the neckline before considering the setup confirmed.

What to Watch For

ASCENDING TRIANGLE

An ascending triangle is a bullish technical analysis pattern characterized by relatively consistent resistance and progressively higher lows.

As buyers step in at increasingly higher prices, the distance between rising support and horizontal resistance becomes compressed.

How to Trade an Ascending Triangle

Identify a relatively flat resistance level combined with a series of higher lows.

The bullish setup becomes more meaningful when price breaks above the upper resistance area.

Traders may look for strong breakout momentum or a successful retest of the previous resistance level before considering the pattern confirmed.

What to Watch For

Not every ascending triangle breaks upward, so confirmation and risk management remain important.

DESCENDING TRIANGLE

A descending triangle is commonly viewed as the bearish counterpart to an ascending triangle.

It typically contains relatively consistent horizontal support combined with progressively lower highs.

This structure can indicate that sellers are repeatedly pushing price lower while buyers continue defending a similar support area.

How to Trade a Descending Triangle

Identify horizontal support and a sequence of lower highs.

A potential bearish setup can develop when price breaks below the established support area.

Rather than reacting to a brief move below support, traders may wait for confirmation that the breakdown is holding.

What to Watch For

BULL FLAG

A bull flag is a bullish continuation pattern commonly used in technical analysis to identify a possible continuation of an existing uptrend.

The initial strong upward move creates the flagpole, while the following controlled consolidation forms the flag.

How to Trade a Bull Flag

Look for a strong upward move followed by a relatively controlled pullback or consolidation.

The bullish setup can gain confirmation when price breaks above the upper boundary of the flag.

A breakout accompanied by renewed buying momentum may indicate that the previous uptrend is ready to continue.

What to Watch For

A deep reversal through the structure can weaken or invalidate the bullish continuation setup.

BEAR FLAG

A bear flag is a bearish continuation pattern that typically appears after a strong downward price movement.

The initial decline creates the flagpole, followed by a temporary upward correction or consolidation that forms the flag.

How to Trade a Bear Flag

Identify a strong bearish move followed by a relatively controlled recovery.

The bearish continuation setup can gain confirmation when price breaks below the lower boundary of the flag.

Traders may also watch for selling momentum to return as price leaves the consolidation.

What to Watch For

FALLING WEDGE

A falling wedge is a technical analysis pattern that forms when price moves between two downward-sloping trendlines that gradually converge.

Although price continues making lower highs and lower lows inside the structure, the narrowing range can indicate that bearish momentum is weakening.

A falling wedge may develop as either a bullish reversal or continuation setup depending on the broader market context.

How to Trade a Falling Wedge

Identify price moving between two converging downward-sloping boundaries.

A potential bullish signal develops when price breaks above the upper trendline.

Rather than assuming every falling wedge will move higher, traders may wait for breakout confirmation before treating the pattern as valid.

What to Watch For

RISING WEDGE

A rising wedge forms when price moves higher between two converging upward-sloping trendlines.

Although price continues making higher highs and higher lows, the narrowing structure may indicate that bullish momentum is weakening.

The pattern is often watched as a potential bearish reversal setup.

How to Trade a Rising Wedge

Identify the two converging upward-sloping boundaries.

A potential bearish signal can develop when price breaks below the lower trendline.

Additional confirmation can help distinguish a genuine bearish reversal from a temporary move outside the wedge.

What to Watch For

CUP AND HANDLE

The cup and handle is a bullish continuation pattern commonly studied by chart traders.

The cup forms as price gradually recovers from a decline, creating a rounded structure. The handle then develops as a shorter period of consolidation or pullback before a potential breakout.

How to Trade a Cup and Handle

Identify a rounded cup structure followed by a relatively controlled handle near resistance.

The bullish setup can gain confirmation when price breaks above the resistance level around the top of the cup.

Traders may wait for a decisive breakout or confirmation that price can remain above the previous resistance area.

What to Watch For

RANGE TRADING

Range trading occurs when price repeatedly moves between an established support area and resistance area without developing a clear directional trend.

Traders may use the boundaries of a range to identify areas where buying or selling pressure has appeared repeatedly.

How to Trade a Range

Begin by identifying reliable support and resistance zones.

A common approach is to look for potential bullish opportunities near support and potential bearish opportunities near resistance.

Avoid assuming the range will continue forever. Traders should monitor both boundaries for signs of a breakout or breakdown.

What to Watch For

PIN BAR

A pin bar is a candlestick pattern used in technical analysis that is characterized by a relatively long wick and a smaller body.

The long wick can indicate that price moved strongly in one direction but was rejected before the candle closed.

Because of this rejection, traders often pay closer attention to pin bars that form near important support or resistance levels.

How to Trade a Pin Bar

Context is extremely important when evaluating a pin bar.

A bullish pin bar near support may indicate rejection of lower prices, while a bearish pin bar near resistance may indicate rejection of higher prices.

Rather than trading every pin bar, traders may focus on patterns that form at meaningful market levels and align with the broader price structure.

What to Watch For

A pin bar by itself does not guarantee a reversal.

ENGULFING PATTERN

An engulfing pattern is a two-candle formation in which the body of the second candle significantly overtakes the body of the previous candle.

There are two common versions:

Bullish Engulfing:

Buyers take control after selling pressure.

Bearish Engulfing:

Sellers take control after buying pressure.

How to Trade an Engulfing Pattern

The location of an engulfing pattern is important.

A bullish engulfing candle near support can provide stronger context than the same pattern appearing randomly in the middle of a range.

Similarly, a bearish engulfing pattern near resistance may carry greater significance.

Traders may wait for the engulfing candle to close and evaluate whether the surrounding market structure supports the potential reversal.

What to Watch For

THREE INSIDE UP / DOWN

Three Inside Up and Three Inside Down are three-candle reversal patterns used in technical analysis to identify a potential change in short-term price direction.

Three Inside Up can develop after a decline and suggest increasing buying pressure.

Three Inside Down can appear after an advance and suggest growing selling pressure.

How to Trade Three Inside Up / Down

First identify the three-candle structure and consider the trend that existed before the pattern formed.

A Three Inside Up setup may provide bullish confirmation after a decline, while a Three Inside Down setup may provide bearish confirmation after an advance.

Context remains important. These patterns can become more meaningful when they form near major support or resistance areas.

What to Watch For

How to Use Technical Analysis in Your Trading

Learning individual patterns is only the beginning.

The most important skill is understanding how a setup fits into the broader market structure.

A technical analysis pattern should not automatically be treated as a signal to buy or sell. Instead, use the pattern as one part of a complete trading process.

Identify the Market Structure

Start by determining whether the market is trending upward, trending downward, or moving sideways.

Find Important Levels

Mark areas of support, resistance, previous highs and lows, and other levels where price has reacted.

Identify the Setup

Look for a technical analysis pattern that matches the current market structure.

Wait for Confirmation

Avoid assuming that a pattern will complete before the market confirms it. Breakouts, breakdowns, candlestick confirmations, and retests can provide additional information.

Define Your Risk

Before entering a trade, know where your trading idea becomes invalid.

Manage the Trade

A good setup can still fail. Manage the position according to a predefined plan rather than making emotional decisions during market movement.

Trading Fundamentals

Why Learn Technical Analysis?

Technical analysis can help traders turn complex price movements into a more structured decision-making process.

Trade with a process, not with emotion.

Instead of reacting to every candle, traders can focus on identifying meaningful market conditions and following a repeatable process.

Focus on high-quality situations

Build decisions around structure, confirmation and risk instead of short-term noise.

The Decision-Making Process

Price

Structure

Setup

Confirmation

Risk

Execution

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