DTT Buzz
Exclusive Market Analysis, Alerts and Commentary from the DaytradeTeam trading staff
Monday, April 16, 2007
Understand Continuation Patterns
Continuation patterns differ from reversal patterns in that continuation patterns usually indicate that the sideways action seen on a chart is merely a pause in the prevailing trend. With the reversal pattern, we know a major trend reversal is at hand. However, the next move after a continuation pattern will be in the same direction the trend was moving previously.
Another difference between the two types of pricing patterns is the time duration. Reversal patterns take longer to build and culminate in a major trend reversal. Continuation patterns are usually shorter in duration and are classified as term or intermediate patterns.
The word "usually" is used frequently here because in pricing patterns there are no rigid rules only general tendencies. There will be exceptions. Take triangles for example. Triangles, which are usually a continuation pattern, can act as a reversal pattern on occasion. They are usually intermediate, but at times they can be seen on longer term charts. The head and shoulders reversal pattern is a pricing pattern which primarily indicates a trend reversal, but can, at times, be merely a continuation pattern.
Pricing patterns generally follow their normal course of action, but the trader needs to allow for a certain amount of ambiguity and the occasional exception. Afterall, the success of the trader lies in his ability to interpret the signals provided.
See our experts determine which signals are being given for successful trades. Watch them use real-time technical analysis in our Live Trading Room.
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Another difference between the two types of pricing patterns is the time duration. Reversal patterns take longer to build and culminate in a major trend reversal. Continuation patterns are usually shorter in duration and are classified as term or intermediate patterns.
The word "usually" is used frequently here because in pricing patterns there are no rigid rules only general tendencies. There will be exceptions. Take triangles for example. Triangles, which are usually a continuation pattern, can act as a reversal pattern on occasion. They are usually intermediate, but at times they can be seen on longer term charts. The head and shoulders reversal pattern is a pricing pattern which primarily indicates a trend reversal, but can, at times, be merely a continuation pattern.
Pricing patterns generally follow their normal course of action, but the trader needs to allow for a certain amount of ambiguity and the occasional exception. Afterall, the success of the trader lies in his ability to interpret the signals provided.
See our experts determine which signals are being given for successful trades. Watch them use real-time technical analysis in our Live Trading Room.
Join our 5 Trading Day Trial for only $5.
Happy Trading,
Nick Fenton
VP of Operations, DaytradeTeam
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