A continuation pattern is a chart pattern described as a series of price movements that indicate that there is a temporary halt in the current prevailing trend, but that the current trend should continue after the break.
Chart patterns can be divided into two broad categories: continuation and reversal patterns.
To make it easy to remember, continuation chart patterns continue the current trend.
Continuation patterns are typically traded by waiting for a breakout and entering a (long or short) position in the breakout’s direction,
Ideally, the breakout is in the SAME direction as the trend.
Not every continuation pattern will result in a trend continuation, where the price resumes moving in the current trend. Some will result in a trend reversal, where the price moves opposite of the current trend.
By waiting for the breakout, you will know whether which one it’ll be.
Examples of continuation chart patterns include:
Chart patterns are used as a way to explain the activities of buyers and sellers by displaying the forces of supply and demand in a visual form.
You are able to see when the forces of demand (bulls) are in control, and when the forces of supply (bears) are in control.
As a “visual summary” of all buying and selling activity, chart patterns provide a “picture” of the battle raging between the bulls and bears.
Chart patterns and technical analysis can help determine who is winning the battle, which allows traders to position themselves accordingly.