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Technical Analysis Tools— Continuation Patterns

帮考网校2020-08-07 09:03:33
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Continuation patterns are chart patterns that indicate a temporary pause in the prevailing trend before the trend continues. These patterns are formed as a result of a temporary consolidation period where the market takes a breather before resuming its previous trend. Technical analysts use continuation patterns to identify potential trading opportunities and to confirm the direction of the trend.

Here are some of the most commonly used continuation patterns:

1. Flags and Pennants: These patterns are formed when the market consolidates in a narrow range after a sharp move in one direction. Flags are rectangular in shape, while pennants are triangular. These patterns are considered bullish if they form after an uptrend and bearish if they form after a downtrend.

2. Symmetrical Triangle: This pattern is formed when the market consolidates in a series of lower highs and higher lows, forming a triangle shape. This pattern is considered a continuation pattern when it forms in the middle of an uptrend or downtrend.

3. Ascending and Descending Triangle: These patterns are similar to the symmetrical triangle but have a distinct slope. The ascending triangle has a flat top and an upward sloping bottom, while the descending triangle has a flat bottom and a downward sloping top. These patterns are considered bullish and bearish, respectively.

4. Rectangle: This pattern is formed when the market consolidates in a rectangular range, with a flat top and bottom. This pattern is considered a continuation pattern when it forms in the middle of an uptrend or downtrend.

5. Wedge: This pattern is formed when the market consolidates in a series of higher highs and higher lows, forming an upward sloping wedge, or a series of lower highs and lower lows, forming a downward sloping wedge. This pattern is considered a continuation pattern when it forms in the middle of an uptrend or downtrend.

In conclusion, continuation patterns are an essential tool for technical analysts as they provide valuable information about the market's direction and potential trading opportunities. However, it is important to note that these patterns are not always accurate and should be used in conjunction with other technical indicators and fundamental analysis.
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