” M and ” W patterns are usually considered as M-Top and W-Bottom patterns with few differences. M and W Patterns usually continue the prior trends where as M-Top and W Bottom patterns terminate the trends. Frequently, “M” and ” W patterns form during the congestion zones. “M” patterns rarely form at the “market bottoms” and “W” patterns rarely form at the “market tops.” The volume concept of timing is very similar to their counter parts “Double tops” and “Double bottoms.” These patterns are also closely related to “Triple tops” and “Triple bottoms,” and “Head and Shoulders” or “Inverse Head and Shoulder” patterns.

Trade: Trades are initiated at the breakdown of the neckline/hump level. For W-Bottoms, trades are initiated at the breakout of the neckline/hump level. Enter a “long” trade above the high of the breakout bar at neckline level, and for M-Tops enter a “short” trade below the low of the breakdown bar at neckline level.

Targets: In both patterns, the targets are set at the pattern high for W-Pattern and pattern low for M Pattern.

Stop: For M-pattern, the trade is protected with a stop loss above the pattern high. For W-Pattern, the trade is protected with a stop loss below the pattern low.

Trading W-Pattern

Trading W Pattern

The example above illustrates a W-Pattern formation at the market highs from the Russell Emini (ER2) chart. After confirmation of the second leg, a “long” trade is entered at the breakout of the neckline/hump level.

  1. Enter a “long” trade above the high of the breakout bar of the hump level.
  2. Place a “stop” order below the low of the pattern.
  3. Set a “target” at the “swing high prior to the first leg.

Trading M Pattern

Trading M Pattern

The example above illustrates a combination of M-Pattern and M-Top. M-Pattern is an occurrence where prices form a M-shape pattern in a congestion zone prior to the trend continuation. M-Top is a clear “top” formation and reversal of trend change. M-Pattern and M-Top are tradable and have clear trading rules and have high reliability. In addition, they are part of 5-point Gartley structures with similar trading rules as Gartley patterns. The major difference between these patterns is M-Pattern continues in the prior direction compared to the M-Top which terminates the prior trend.

Source : “Trade Chart Patterns Like the Pros” by Suri Duddella