Chart Patterns for Trading Part 2 Continuation Patterns

In this part, I discuss continuation patterns. They mean the price will continue the current trend.

In practice applying these patterns is tricky and is not easy. Trading needs a lot of experience.

Bullish Rectangle

The pattern happens when the price is rising but for a period it oscillates sideways and forms a rectangle and by that, I mean create almost equal highs and equal lows as seen in the above image.

The ideal scenario is to wait for the price to retest the upper side of the rectangle which means the price breaks above and out of the rectangle then comes down and touches it and then goes up again.

The lower side of the rectangle is chosen as stop loss.

Bearish Rectangle

The pattern happens when the price is falling but for a period it oscillates sideways and forms a rectangle and by that, I mean create almost equal highs and equal lows as seen in the above image.

Bullish Flag

For the stop loss when using this pattern I choose the lowest price inside the flag but depending on the situation I may use another level.

Bearish Flag

Bullish Pennant

The stop loss when using this pattern depends on the situation but I choose either the middle of the lower line or the highest low of the pattern or the lowest low of the pattern.

Since this pattern is narrow, I usually choose somewhere between the lowest low and the middle of the lower line.

In the above image, the price has touched the lower line four times so we have four lows. The first one is the lowest low of the pattern and the second one is the highest low of the pattern.

Bearish Pennant

Bullish Symmetrical Triangle

The stop loss when using this pattern depends on the situation but I choose either the middle of the lower line or the highest low of the pattern or somewhere between these two points.

Just to be clear about the highest low, for example in the above image the highest low would be the third time that the price has touched the lower line in the pattern.

This pattern seems similar to the bullish pennant. I agree they are very similar. The main difference is that the pennant patterns are narrower than symmetrical triangles.

Bearish Symmetrical Triangle

Bullish Ascending Triangle

Pay attention that the upper line of this pattern is horizontal.

The mentality behind choosing the stop loss in this pattern is similar to what I explained about pennant and symmetrical patterns.

Bearish Descending Triangle

Cup & Handle

The left semi-circle is the cup and the right one is the handle. The lowest point of the handle is chosen for stop loss. The Radius of either the cup or handle is added to the point where the price breaks above the horizontal line to get an estimation of the price target for those who want to enter a trade.

Reverse Cup & Handle

In all of the bullish patterns that were similar to a traingle in this article, the following image applies regarding choosing the target price:

We add that distance to the break-out point at A and the target is point T.

Remember these are just theories and not guaranteed.

Trading is not an exact science and I think that’s why it needs a lot of practice, observation, and experience.

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