Trade Stock Indices

Continuation Setup Patterns

When these stock continuation setups take shape, they confirm the trend keeps going the same way.

These patterns are used by stock traders to identify half way points of the trend, this is because they form at half-way point of a market trend.

There are four types:

  • Ascending triangle
  • Descending triangle
  • Bull flag/pennant
  • Bear flag/pennant

Ascending Triangle

The ascending triangle pattern materializes during an uptrend in indices, signaling an expectation that the price's upward momentum is set to persist.

It points to a resistance level. Buyers push it up each time. A break sends prices higher.

Overhead resistance temporarily prevents the market from moving higher, while the rising trend-line beneath the setup signals that the buyers(bulls) are still present. An upside penetration of the upper line is a trading buy signal for a market breaking out from an ascending triangle.

The ascending triangle appears in an Indices upward trend and forms as a break in the upward indices trend, suggesting that the upward trend will likely continue later on.

Rising Triangle Setup Trading

The market formed an ascending triangle as it moved higher, and this signaled the rally would keep going. The buy signal comes when the stock price breaks above the upper sloping line and momentum keeps pushing it up.

Descending Triangle

The descending triangle is formed in a downward trend and it shows that the downwards direction of price movement is going to continue.

This indicates the presence of a support zone that sellers consistently push lower, and once it is breached, the market is likely to continue its downward trajectory.

Support holds the market from dropping further for a bit. The sloped line above points to bears still in control. If price breaks below that lower line in a falling triangle, it signals a sell. That means more drops ahead.

Inside a downtrend on indices, the descending triangle pattern forms as prices pause before heading even lower.

Falling Triangle Continuation Chart Setup Trading

Market formed & shaped a descending triangle during its downward trend which led to further selling and continuation of the down-wards trend. The technical sell stock signal is when stock price breaks-out the lower horizontal sloping line as the selling resumes to push the market lower.

Bull Pennant/Flag

This setup forms what resembles a rectangle. The rectangle is shaped by 2 parallel lines that act as support and resistance for the price until the market price breaks out. In general, the flag won't be formed perfectly flat but it will be formed sloping.

You can see the bull flag when stock prices are generally going up. In this pattern, the price goes down a bit, so there's a small drop with prices not changing much, creating a slight downward slope. You should buy when the stock price goes above the flag's top line. The flag's high and low points can be linked with lines that run side by side, making it look like a narrow channel.

The pennant formation occurs at the midpoint of a bullish upward trend, and following a breakout, a movement equivalent to the height of the flagpole is anticipated.

Bull Flag Continuation Chart Trade Setup Indices Trading

The bull pennant paused the rise briefly. The market built strength to push higher. The breakout trade finished when price broke the top line upward.

Bear Flag/Pennant

This charting pattern manifests during a sustained downtrend in Indices trading. The bear flag pattern is classified as a continuation formation, characterized by a brief market pullback exhibiting minimal price movement within a narrow range, with a slight upward inclination. The signal to sell is generated when the stock price decisively breaks below the lower boundary of this inverted flag. The pennant section's turning points can be connected by parallel lines, forming what appears as a miniature channel.

Bear Flag Continuation Chart Trade Setup Stock Index Trade - How to Read Bear Flag Stock Setups

The bear pennant above was just a resting period for the market before more selling. The continuation trading signal was confirmed when the lower line was broken to the downside.

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