I just noticed that more and more people are talking about the QM Pattern in the trader community, so I wanted to take a closer look to see what it really is. It turns out to be a quite interesting chart pattern as well.

The Quasimodo Pattern, or commonly called the QM Pattern, is a price pattern that indicates a trend reversal. Its name comes from the character of the hunchback of Notre Dame. Why is it called that? Because its shape resembles a head and shoulders, but the right shoulder is not symmetrical with the left shoulder, making it look more like a hunchback.

The QM pattern consists of three main swing points. At first glance, it looks like a Head and Shoulders pattern, but the difference is that after the head forms, the subsequent correction breaks or sharply pierces the neckline. Then it forms a right shoulder that is not higher or lower than the left shoulder, and at this point, the price trend will change.

What’s good about the QM pattern is that it occurs at actual trend reversal points—whether from downtrend to uptrend or from uptrend to downtrend. Therefore, it can be divided into two types.

In the case of a Bullish QM Pattern, it occurs at the end of a downtrend. The price will form a new low first, then rebound strongly and break through the previous resistance to make a new high. But it cannot hold there; the price then drops back to test the support at the left shoulder. After testing, it reverses and breaks the previous high, and the trend will truly shift to an uptrend.

In the case of a Bearish QM Pattern, it occurs at the end of an uptrend. The price will form a new high first, then drop sharply and break through the previous support to make a new low. But it gets pushed back up and cannot surpass the left shoulder. After testing, it drops below the previous low, and the trend will truly shift to a downtrend.

The fundamental basis of the QM pattern comes from the Dow Theory, which states that the trend continues until a signal indicates a change. In an uptrend, the price will always make new highs; in a downtrend, it will always make new lows. But when this pattern appears, it signals that the old trend is about to break, and a new trend is about to begin.

Trading the QM pattern can work well with Demand and Supply Zones. In the bullish case, look for points where the price makes a new high and then drops back to test the support at the left shoulder. That point is a Demand Zone, suitable for buying, with stop-loss placed at the head or the previous low, and take-profit when the trend changes. In the bearish case, it’s the opposite: when the price makes a new low and then rebounds to test the resistance at the left shoulder, that is a Supply Zone for selling or shorting.

But be cautious: if you apply the QM pattern to assets with low trading volume, the pattern might look genuine, but in reality, it could be caused by the trading of just a few people. The results might be distorted from what they should be.

In summary, the QM pattern is an interesting trading tool for trend followers. It’s not just a simple chart shape but is based on Dow Theory and supply-demand rules, making it fairly reliable. However, before using it in real trading, make sure to check the trading volume of the asset to ensure its validity.