Continuation Patterns

What are Continuation Chart Patterns?

Continuation patterns are chart patterns, which are formed due to temporary profit booking, in an ongoing trend. They are like resting areas in an ongoing trend. They are the areas where a great good number of traders think that price may not go further. But still bigger group of traders continue to take action in the direction of the trend.

Pattern Trading gives us consistent, profitable trades.


How Continuation Chart Patterns are formed?

In an up trend, the momentum slows down due to periodic profit booking. A good lot of traders think that it is enough or that they have reached their target. So they want to sell their position. The supply increases reducing the momentum of price rise or the price might even drop. Buy the smart money finds it an opportunity to add more to their position. So the price slows to drop or it may even rise.

Similarly, in a down trend, a lot of traders who are short want to book some profit. Those who think that the stock is available for a bargain starts buying. But the smart money finds it easy to sell when there is increased demand. When the supply becomes more than the increased demand, price falls further. And the trend continues.

This tug of war between buyers and sellers, moves the prices up and down causing continuation chart patterns in the stock charts, before they continue in the direction of original trend.


What is the significance of Continuation Chart Patterns?

Having a good knowledge of continuation chart patterns allows us to speculate positively about the further course of the trend. It allows us to add more to our position. Those who wants to hold on for a longer period are at ease not worrying about temporary pull back. 

These can be bullish continuation patterns or bearish continuation patterns.



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    Some of the common chart patterns, after which the trend may continue are: 

  • Falling Wedge
    Falling Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and descending trend lines.
  • Rising Wedge
    Rising Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and ascending trend lines.
  • Flag Pattern
    Flag Patterns are continuation chart patterns, formed by a minor consolidation, which is contained with in a small rectangle or a parallelogram.
  • Pennant Pattern
    Falling Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and descending trend lines.



    Here are some chart patterns after which trend may continue or may reverse. 

  • Ascending Triangle
    Ascending Triangle is a chart pattern, characterized by horizontal top and rising bottom. This is created when a bullish market pushes the price up against a resistance level. It can be both continuation and reversal chart patterns.
  • Descending Triangle
    Descending Triangle is a chart pattern, characterized by horizontal bottom and sloping top. This is created when a bearish market pushes price down against a support level. It can be both continuation and reversal chart patterns.
  • Symmetrical Triangle
    Symmetrical Triangle is a chart pattern, characterized by converging top and bottoms. This is created when there is indecision in the direction of the market. It can be both continuation and reversal chart patterns.
  • Channel Formation
    Rectangle Formation can be both continuation and reversal chart patterns. The stock prices tend to move between two horizontal support and resistance lines.


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