Additionally, a full breakout doesn’t always happen, or instead, false breakouts occur multiple times before the pattern is actually broken, and a continuation or reversal occurs. For example, a continuation pattern can appear during a trend, but a trend reversal can still happen. Unfortunately, continuation patterns are not always reliable. Common continuation patterns, including:īelow are descriptions of these continuation patterns.
Technical analysts use several continuation patterns to signal that the price trend will continue.
Many traders look for increased volume when the price breaks out of a continuation zone since a small volume on a breakout typically suggests the pattern is likely to fail. However, not all continuation patterns will result in the continuation of the trend - many will also result in reversals. Continuation patternsĬontinuation patterns occur in the middle of a prevailing trend, indicating that the price action will likely resume in the same direction even after the continuation pattern completes. Note: Below, we have classified the chart patterns by whether they are typically continuation or reversal, but many can indicate either a continuation or a reversal, depending on the circumstances. However, traders are best to assume a price trend will continue in its current direction until it is confirmed that it has reversed. Therefore, traders must pay close attention to trendlines (used to formulate the price pattern) and which way the price eventually breaks. In general, for both continuation and reversal patterns, the longer the pattern forms, and the larger the price movement within it, the more significant the predicted move once the price breaks out.ĭuring the development of a price pattern, there is no way of knowing whether the trend will continue or reverse. Any testimonials contained in this communication may not be representative of the experience of other eToro customers and such testimonials are not guarantees of future performance or success. Finbold is compensated if you access certain of the products or services offered by eToro USA LLC and/or eToro USA Securities Inc.
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