Chart Patterns

Methodology inspired by publicly taught price action trading frameworks; all text is an original paraphrase.

Defaults

Preflight

Run canonical pre-flight per contracts/preflight.md. Propagate X-Agentii-Trace per contracts/x-agentii-trace-header.md.

Data Source Priority

1. Chart patterns framework — references/chart-patterns-reference.md (bundled full pattern methodology)
2. Upstream context — market structure classification from price-action skill output
3. Technical setups — search_technical_setups(pattern_type=..., market_condition=..., timeframe=...) for matching against gold.technical_setups

Methodology

Retrieval Scope

structured_only

Retrieval Strategy

This skill follows Branch (d) Simple Lookup from contracts/retrieval.md: the pattern recognition framework is bundled in references/chart-patterns-reference.md. Real-time price data via get_realtime_quote. Matched technical setups via search_technical_setups. No unstructured document retrieval.

Temporal Scope

See frontmatter temporal_scope block.

Tool Allowlist

See frontmatter allowed_tools.

Protocol

This skill implements the price action trading pattern recognition framework: 17 distinct chart pattern types, each with specific identification criteria, decision rules, and entry/exit parameters. The core architecture: Setup = Context + Signal Bar — context (from price-action skill) determines which patterns are valid. A perfect signal bar in the wrong context is a losing trade. Detailed methodology and pattern-specific rules are in references/chart-patterns-reference.md.

Step 1 — Macro Context (Mode C — degrade-gracefully)

1. Assess VIX via get_realtime_quote for broad market proxy.
2. VIX elevated (> 25) → tighten position sizing, favor defined-risk setups. Low VIX (< 15) → standard sizing.
3. Degrade gracefully if unavailable: annotate coverage_gap and proceed.

Step 2 — Context from price-action Skill

Receive or derive market structure classification:

1. market_condition: trending_up / trending_down / ranging
2. trend_strength: strong / weak(channel) / none
3. always_in_direction: long / short / neutral
4. cycle_phase: breakout / channel / trading_range / reversal

Critical rule: Context determines which patterns are valid:

• Strong bull trend + always_in_long → only long patterns (H1, H2, bull breakouts). All short patterns invalid.
• Strong bear trend + always_in_short → only short patterns (L1, L2, bear breakouts).
• Ranging → Buy Low/Sell High only near boundaries. Middle of range = no trade.

Step 3 — Pattern Identification

Apply the full 17-pattern recognition framework based on current context:

If in a Trend:

1. Pullback depth → count legs: 1-leg = H1/L1 (strong trend), 2-leg = H2/L2 (channel), 3-leg = H3/L3 (broader), 4-leg = H4/L4 (near TR).
2. Channel boundaries → identify trend line and channel line. Assess tight vs broad.
3. Breakout signals → true vs false breakout assessment using bar characteristics.
4. Reversal watch → check if 5-step reversal sequence is progressing (Steps 1-5).

If in a Trading Range:

1. Range boundaries → identify support and resistance levels from prior swing points.
2. Breakout preparation → monitor for breakout direction.
3. TR size assessment → small TR (< 20 bars) = pullback, direction biased. Large TR (≥ 20 bars) = direction neutral.

If near a Trend Extreme:

1. Climax check → consecutive strong bars → sudden large counter-bar → climax detected. After climax: expect TR, not immediate reversal.
2. Wedge check → three pushes to same area, each push weaker → exhaustion signal.
3. 5-step reversal → if Steps 1-4 are complete, watch for Step 5 confirmation.
4. Double top/bottom → two tests of same level; neckline break for confirmation.

Step 4 — Setup Matching via MCP

Match identified patterns against the gold.technical_setups database:

search_technical_setups(
  pattern_type=<pullback|breakout|reversal|trend_following|range_trading>,
  market_condition=<trending_up|trending_down|ranging>,
  timeframe=<derived from analysis>,
  instrument_scope=[<equity|option|futures>]
)

1. Filter results by research_score (higher = more thoroughly researched).
2. For each matched setup, load confirmation signals and compare against current market data.
3. Rank by fit: exact match → similar match → partial match.
4. If no match: proceed with manual pattern rules from references/chart-patterns-reference.md.

Step 5 — Pattern Output and Handoff

Produce structured pattern identification output:

1. Primary pattern: The best-fit identified pattern with confidence level.
2. Secondary patterns: Alternative patterns if primary is borderline.
3. Invalid patterns: Patterns that appear but are invalidated by context (e.g., bearish engulfing in strong bull).
4. Handoff to trade-execution: Pattern type + market condition + timeframe → for setup selection and trade plan generation.

Output File

{ticker}/{YYYY-MM-DD_HHMM}_chart-patterns_{affix}.md

Output Structure

1. Executive Summary — Primary pattern identified, market context, confidence level
2. Context Assessment — Market structure (from price-action), Always In direction, valid/invalid pattern directions
3. Trend Analysis — Bar counting (H1/H2/H3/H4 status), channel classification (tight/broad), breakout quality
4. Reversal Assessment — 5-step sequence status (which steps have completed), climax detection, wedge count
5. Pattern Details — Primary pattern with specific entry/stop criteria, secondary patterns
6. Setup Matches — Results from search_technical_setups ranked by fit; match quality assessment
7. Handoff Parameters — pattern_type + market_condition + timeframe for trade-execution skill
8. Coverage Gaps — Data limitations and degraded-mode annotations

Error Handling

Memory Load

See contracts/memory-load.md.

Snapshot

See contracts/snapshot-synthesis.md.

Final Summary (TUI)

Include ### Key Citations block with 0-10 clickable /v/ URLs.

References

• references/chart-patterns-reference.md
• contracts/citation-and-memory.md
• contracts/output-frontmatter-schema.md
• contracts/memory-load.md
• contracts/snapshot-synthesis.md
• contracts/preflight.md
• contracts/retrieval.md