5. Continuation Patterns Flashcards
What is a continuation pattern?
Price movements that occur during trends, they indicate that a trend has to go through a consilidation period to create new momentum, but is likely to continue in its previous direction once the consolidation is complete
How do continuation patterns happen in a bullish trend?
In a bullish trend all traders illing to buy have bought and there currently not enough demand to let prices rise any further
How do continuation patterns happen in a bearish trend?
In a bearish trend all traders willing to sell have sold, and there is currently not enough supply to let prices fall any further
How many different types of Triangle patterns are there?
- Ascending Triangle
- Descending Triangle
- Symetrical Triangle
What is this pattern called?
Descending Triangle
What is this pattern called?
Ascending Triangle
How do triangle formations work?
The price is contained between the resistance or support level and the trend line, the resistance/support level will remain constant while the trend line will either rise or fall, depending on whether the market is currently in a bullish/bearish trend
How do you play triangle patterns?
Eventually the resistance/support, trend line will meet, when this happens or shortly before it happens, one of the two containing elements has to be broken, which one is broken first determines the markets future direction
What is the most exact price formation strategy?
Flag Pattern
What pattern is this?
Flag Pattern
In a bullish trend what direction will a flag move?
In a bearish direction
In a bearish trend what direction will a flag move?
In a bullish direction
What happens when a flag is completed?
You can expect prices to continue moving at roughly the same rate for roughly the same distance as they did before the flag was created
When is it most common for Pennant Patterns to occur?
after a steep bullish/bearish trend
What is the most significant characteristic of a pennant pattern?
A continuously narrowing trading ranges
What usually happens when the resistance/support levels meet during a pennant pattern?
When the pennant is completed prices are likely to break out to continue the previous trend
What is the difference between the flag and the pennant?
The pennants two approaching lines allow for a relatively safe prediction on when the pennant will end, pennants cannot go once both lines meet. The glag is formed by two parallel lines
What is a rectangle pattern?
A rectangle occurs when an uptrend hits a resistance line or when a downtrend hits a support level, the trend has to overcome the resistance/support before it can continue its original direction
What makes up a rectangle pattern?
In order to generate enough bullish/bearish energy to break through a resistance/support level, the market will enter a phase of sideways movement known as lateral consolidation
How do rectangle patterns work?
The asset will be trapped between resistance/support, and eventually break out of the rectangle pattern, it is most likely to return to the current market trend
