QM Pattern from a trader’s perspective: A tool indicating trend reversal

What is QM and Why You Should Know

What is the QM Pattern or Quasimodo Pattern is a price formation that is not as well-known as Head and Shoulders but is one of the highly effective chart patterns used to identify trend reversals. Experienced traders often pay close attention to this pattern because it reflects real changes in market supply and demand.

The name “Quasimodo” comes from the character in The Hunchback of Notre-Dame who is humped, because this pattern shows asymmetrical head and shoulders, with one shoulder being lower or higher than the other, creating a price structure resembling an M or W with distinctive features.

Structure of the QM Pattern: 3 Main Swing Points

This chart pattern consists of 3 key points called Swing Points:

• Left Shoulder (Left Shoulder): The starting point of formation
• Head (Head): The highest or lowest point of the pattern, which will break through the neckline sharply
• Right Shoulder (Right Shoulder): The final upward or downward point, not exceeding the level of the left shoulder

In fact, the main difference between the QM Pattern and Head and Shoulders is the breakout through the neckline that occurs after the head formation, which affects the risk and profit potential.

Bullish QM Pattern: Uptrend Signal

When the trend is in a downtrend and the price makes new lows (Lower Low) consistently, you will notice:

• The price begins forming a Lower Low, confirming the downtrend.
• Then, a strong rebound occurs, breaking through the previous neckline, and creating a new higher high (Higher High) — this is the Demand Zone.
• The price then drops back to test the support level but does not go below the left shoulder. At this point, the price is forming an uptrend pattern (Higher Low).
• When the price tests this support and reverses above the previous Higher High, the trend fully shifts from downtrend to uptrend.

Bearish QM Pattern: Downtrend Signal

Conversely, when the trend is upward:

• The price makes new highs (Higher High) repeatedly until a sharp correction occurs, breaking the support and forming a new lower low (Lower Low) — this is where the Supply Zone plays a role.
• The price bounces back up but cannot surpass the left shoulder. The pattern indicates a developing downtrend (Lower High).
• When the price tests this resistance and falls below the previous Lower Low, the trend clearly reverses to a downtrend.

The Theory of the ‘Star’ and the Fundamentals of the QM Pattern

The strength of the QM Pattern comes from adherence to Dow Theory, which states:

Trends tend to continue until a clear signal of reversal appears. In an uptrend, higher highs are made; in a downtrend, lower lows are consistently formed.

The QM Pattern occurs when this change happens — when a Lower Low turns into a Higher High or a Higher High turns into a Lower Low — reflecting shifts in buying and selling pressure in the market.

How to Trade the QM Pattern Using Demand and Supply Zones

For Bullish QM Pattern:

When the price tests the (Demand Zone) that is not below the left shoulder, it is a key entry point. Place a stop-loss below the previous low and wait for a clear trend reversal.

For Bearish QM Pattern:

When the price rebounds to test the (Supply Zone) that is not higher than the left shoulder, you can enter a sell position. Place a stop-loss above the previous high. Profit targets depend on short-term or long-term trend changes.

Cautions When Using the QM Pattern

The main limitation of this pattern is that it should be used with assets that have sufficient trading volume. If trading volume is low, the price pattern may occur randomly due to trading by a few investors, making it unreliable.

Always verify that you are viewing the chart on an appropriate timeframe. Using too short a timeframe may lead to false detections.

Summary

The QM Pattern may not be as widely recognized as Head and Shoulders, but it is a valuable tool in the trader’s arsenal, especially for trend followers (Trend Follower). Based on Dow Theory and supply-demand principles, this pattern is highly effective in identifying market reversals. When combined with good risk management and careful volume analysis, the QM Pattern can become a reliable trading signal.