Continuation Setups

When these continuation trading patterns are formed they confirm that the current trend is going to continue heading in same direction.

These patterns are used by traders to spot half-way points of the trend, this is because they form at the 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 trend and it shows that the upwards direction of the market 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 price will continue heading up-ward.

Overhead resistance temporarily stops the market from advancing higher, while the rising trend line beneath the pattern setup signals that buyers are still present. An upside penetration of the upper line is a technical buy signal for a market breaking out from an ascending triangle.

Found within a upward trend, the ascending triangle forms as a consolidation period within the up trend and indicates upside continuation will follow.

The market formed an ascending triangle during its up trend which led to upside continuation. Buy point is when price clears the upper sloping line and the market continues heading up-ward.

Descending Triangle

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

It shows that there is a support level that the sellers keep pushing each time moving it lower, and once it breaks price will continue to move downwards.

Support temporarily stops the market from declining, while the descending sloping line above the pattern setup signals that the sellers are still present. A down-side penetration of the lower line is a technical sell signal for a market breaking out down from a descending triangle, and this shows selling will follow.

Found within a downward trend, the descending triangle forms as a consolidation period within the down trend and shows downside continuation will follow.

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

Bull Flag/Pennant

This pattern forms what looks like a rectangle. The rectangle is formed by two parallel lines that act as support & resistance for the price until the price breaks out. In general, the flag will not be formed perfectly flat but it will be sloping.

The bull flag is found within a upward trend. In this continuation pattern where the market retraces slightly, it is therefore a slight retracement with narrow price action that has a slight downward tilt. The technical buy point is when price penetrates the 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 looks like a small channel.

The pennant occurs at halfway point of a bullish upward trend and after a break-out a similar move equal to the height of the flag pole is expected.

The bull pennant above was just a resting period as the market gathered strength to break-out and move higher. The continuation signal was confirmed as a upper line was broken to the up-side.

Bear Flag/Pennant

This flag is found in a downward trend. The bear flag is a continuation pattern where the price retraces slightly with a narrow price action that has a slight upward tilt. The technical sell point is when price penetrates the lower line of the inverted flag. The pennant portion has highs and lows which can be connected by small lines which are parallel, giving it what looks like a small channel.

The bear pennant above was just a resting period for the market prior to more selling. The continuation signal was confirmed as the lower line was broken to the down-side.