• Continuation Patterns
  • Triangles
  • Wedges
  • Pennants
  • Flags and Rectangles

Continuation Patterns

  • A prerequisite for any continuation pattern is the existence of a prior trend
  • Continuation patterns indicate a temporary pause in the trend
  • The next move will be in the same direction as the trend that preceded the formation
  • Trading volume plays a important role in confirming these price patterns

The most common trend continuation patterns are:

  1. Triangles
  2. Wedges
  3. Flags and Pennants
  4. Rectangles

Triangles

Bullish Symmetrical Triangles

  • The pattern contains at least two lower highs and two higher lows
  • When these points are connected to an apex, the triangle is formed
  • Volume should decrease as the price moves within the triangle
  • The breakout is expected to happen between two-thirds to three-quarters of the width of the triangle
  • Volume should increase as the market breaks out of the pattern

 

 

 

Bearish Symmetrical Triangles

  • The pattern contains at least two higher lows and two lower highs
  • When these points are connected to an apex, the triangle is formed
  • Volume should decrease as the price moves within the triangle
  • The breakout is expected to happen between two-thirds to three-quarters of the width of the triangle
  • Volume should increase as the market breaks out of the pattern

Bullish Measuring Techniques

  • Measure the height of the base of the triangle, and extend that distance from the breakout point
  • The second technique is to draw a parallel line to the lower triangle line
  • Where the parallel line meets the apex we know WHERE the price will be and WHEN
  • Where the parallel line meets the apex we know WHERE the price will be and WHEN

Bearish Measuring Techniques

  • First technique is to use the vertical height at the base and extend from the breakout point
  • The second technique is to draw a parallel line to the upper triangle line
  • Where the parallel line meets the apex we know WHERE the price will be and WHEN
  • The price is expected to reach the target at the date where the Apex is

 

Bullish Wedges

  • The pattern is identified by two converging trendlines, that come together at an apex
  • It is an intermediate pattern that takes more than 25 candles to form but not more than 75 candles
  • The Bullish Wedge has a noticeable slant to the downside against the prevailing uptrend
  • A falling wedge is considered bullish
  • Like triangles the same breakout periods and measuring techniques apply

Bearish Wedges

  • Identified by two converging trendlines that come together at an apex
  • It is an intermediate pattern that takes more than 25 candles to form but not more than 75 candles
  • It has a noticeable slant to the upside, against the prevailing downtrend
  • A rising wedge is considered bearish
  • Like triangles the same breakout periods and measuring techniques apply

Bullish Flags and Pennants

  • The flag and pennant represent brief pauses in a dynamic market move
  • They are preceded by an almost straight line move called a flagpole, which happens on heavy volume
  • Prices then pause for a few candles on very light volume
  • The move continues on a burst of volume
  • Both patterns occur at about the midpoint of the market move

 

 

Bearish Flags and Pennants

  • The flag and pennant represent brief pauses in a dynamic market move
  • They are preceded by an almost straight line move  called a flagpole, which happens on heavy volume
  • Prices then pause for a few candles on very light volume
  • The move continues on a burst of volume
  • Both patterns occur at about the midpoint of the market move

Bullish Rectangles

  • The pattern is easily identified by at least two similar highs and lows
  • If rallies are on heavy volume, then the formation is probably a continuation in the uptrend
  • If the heavier volume is on the downside, then it can be considered a possible trend reversal

Bearish Rectangles

  • The pattern is easily identified by at least two similar highs and lows
  • If setbacks are on heavy volume, then it is probably a continuation in the downtrend
  • If the heavier volume is on the upside, then it can be considered a possible trend reversal