Why Chart Patterns Matter for the CMT Exam
Chart patterns carry 20% weight on CMT Level 1 and appear frequently on Level 2 — making them one of the most heavily tested topics. This guide covers every pattern you need to know.
For the complete curriculum breakdown, see our Ultimate CMT Exam Guide 2026.
Reversal Patterns
Head and Shoulders (Top)
The classic reversal pattern consists of three peaks: left shoulder, head (highest), and right shoulder. The neckline break confirms the pattern.
Measured move target = Distance from head to neckline, projected below the neckline break.
Inverse Head and Shoulders (Bottom)
Mirror image of the top pattern — three troughs with the middle being the deepest. Signals a bullish reversal.
Double Top and Double Bottom
- Double Top: Two peaks at similar levels — bearish reversal signal
- Double Bottom: Two troughs at similar levels — bullish reversal signal (the "W" pattern)
- Target = height of the pattern projected from the breakout point
Triple Top and Triple Bottom
Three attempts at a price level that fail. Less common but highly reliable when they occur.
Continuation Patterns
Triangles
- Ascending triangle: Flat top resistance, rising bottom support — typically bullish
- Descending triangle: Falling top resistance, flat bottom support — typically bearish
- Symmetrical triangle: Converging trendlines — direction of breakout determines bias
Flags and Pennants
Small, tight consolidation patterns appearing after sharp moves (the "flagpole"). They almost always resolve in the direction of the prior trend.
Wedges
- Rising wedge: Bearish pattern — converging upward-sloping trendlines
- Falling wedge: Bullish pattern — converging downward-sloping trendlines
Volume Confirmation
Volume is critical for pattern validation. Key rules per Dow Theory:
- Breakouts on high volume are more reliable
- Volume should decline during pattern formation (consolidation)
- Volume expands on the breakout candle
- Failed breakouts on low volume are common traps
Pattern Price Targets
| Pattern | Target Calculation |
|---|---|
| Head & Shoulders | Head-to-neckline height from neckline |
| Double Top/Bottom | Pattern height from breakout |
| Triangle | Width of base projected from breakout |
| Flag/Pennant | Flagpole length from breakout |
| Cup & Handle | Cup depth from rim breakout |
Practice Pattern Recognition
Studying patterns requires exposure to real charts. Use our practice tests with chart exhibits, and review technical indicators for confirmation signals alongside patterns.
Return to the complete CMT exam guide for more topics.
Chart Pattern Reliability — Success Rate by Pattern
Based on Bulkowski's research on 10,000+ pattern occurrences
Head & Shoulders Pattern — Price Action Example
Classic top reversal pattern with neckline break