The document discusses the three most common and profitable chart patterns for investors: 1) Cup-with-handle pattern, which often signals the beginning of a stock price run-up. The buy point is when the stock moves through the high of the handle on heavy volume. 2) Double bottom pattern, which resembles the letter W. The buy point is when the stock surpasses the middle of the W. 3) Flat base pattern, which has a mild correction of less than 15% over at least 5 weeks. The buy point is 10 cents above the previous high on heavy volume.

1. THE 3 MOST COMMON &
PROFITABLE CHART PATTERNS
INVESTOR’S BUSINESS DAILY

2. Just as doctors would be irresponsible not
to use x-rays on their patients, investors are
just plain foolish if they don’t learn to
interpret the price and volume patterns
found on stock charts.
William J. O’Neil, IBD Founder
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3. WHY SHOULD
YOU USE STOCK
CHARTS?

4. CHARTS, CHARTS, CHARTS
Charts are used to determined when to buy and sell stocks
Fund managers and other large institutional investors
account for 80% of all trading activity
The goal of the investor should be to:
Buy stocks institutional investors are buying heavily
Avoid stocks that are selling aggressively
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5. WHAT ARE THE 3
MOST COMMON
& PROFITABLE
CHART PATTERNS?

6. CUP-WITH- HANDLE
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7. The most common highly successful
chart pattern is the Cup-with-Handle.
This pattern often merges at the
beginning of a run-up in the stock price.
Buy point occurs when a stock moves
up through the handle’s high on
heavier than normal volume, at least a
40% increase above the stock’s
average daily volume.
Handle should form in the upper half
go the cup, and within 15% of the old
price high.
Base Length - base should occur over
at least 7 weeks, but can last much
longer
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CUP-WITH-HANDLE

8. DOUBLE BOTTOM
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After the Cup-with-Handle, the second
most common chart pattern is the
Double Bottom.
It looks like the letter “W”, but the
second leg of the W should go a
little lower than the first. Handle
should form in the upper half go the
cup, and within 15% of the old price
high.
The pivot, or buy point of the
double bottom is just as the stock
surpasses the middle of the “W” as
it’s coming up from its second
bottom
Sometimes, a double bottom may
form a handle area, in which case
the buy point will be 10 cents above
the high of the handle, just like the
cup-with-handle.
DOUBLE BOTTOM

10. FLAT BASE
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The Flat Base is usually a second-stage
base pattern.
It has a minimum time frame of 5
weeks rather than the 7 weeks
minimum required of the cup-with-
handle or double bottom.
The flat base has a mild correction,
not more than 15%, and the price
range will usually remain tight
through the pattern.
The pivot or buy point, for the flat
base is the 10 cents above its
previous high on volume at least
40% above its average daily volume.
FLAT BASE

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