Continuation Setup Patterns
When these continuation stock setups are formed they confirm that the current trend is going to continue moving in same direction.
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 is formed in an up indices trend & it shows that upwards direction of the price is going to continue.
It shows that there is a resistance level that the buyers keep pushing each time moving it higher, and once it breaks, the price will continue moving upwards.
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.
Found within a Indices upward trend, the ascending triangle develops/forms as a consolidation period within the up indices trend & reflects upside continuation will follow.
The market developed formed an ascending triangle pattern during its up indices trend which led to upside continuation. Buy point is when stocks price clears the upper sloping line and the market continues moving upwards.
Descending Triangle
The descending triangle is formed in a down trend and it shows that the downwards direction of price movement is going to continue.
It shows that there is a support zone that the sellers keep pushing each time moving it lower, & once it breaks, the market will continue to move downward.
Support temporarily prevents the market from falling, while the descending slanting line above setup signals that sellers(bears) are still present. A downside penetration of the lower line is a technical sell signal for a market breaking downward from a descending triangle, & this demonstrates selling will follow.
Found within a Indices downward trend, the descending triangle pattern formation forms as a consolidation period within the down trend & demonstrates downside continuation will follow.
Market formed a descending triangle during its down 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 formed by two 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.
The bull flag is found within a Indices upwards trend. In this continuation pattern where the market price retraces slightly, it's therefore a slight retracement with narrow price action which has got a slight downwards tilt. The technical buy point is when stock price penetrates upper line of the flag. The flag portion has highs and lows which can be connected by small lines which are parallel, giving it what resembles a small channel.
The pennant occurs at half-way point of a bullish upwards trend & after a break out a similar move equivalent to the height of the flag pole is expected.
The bull pennant above was just a resting period as the market gathered power to break out & move higher. The continuation trade signal was completed when the upper line was broken to the up side.
Bear Flag/Pennant
This flag is found in a Indices downwards trend. The bear flag is a continuation pattern where the price retraces slightly/a little with a narrow price action that has got a slight upwards tilt. The technical sell point is when stock price penetrates the lower line of the inverted flag. The pennant portion has highs and lows that can be connected by small lines which are parallel, giving it what resembles a small channel.
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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