Patterns of continuation
Patterns of trend extension are the ones of the main components of chart technical analysis, with the help of them traders can evaluate the possible future trend behavior. They appear after a small pause, when it may seem that the trend has weakened, because the current trend is suspended. However, this is wrong. This is just a pause, after it the trend is expected to move. The ability to see and distinguish patterns of extension of the trend from reversal formations, after this the price can suddenly change its direction, will help trading against the prevailing trend, getting the greatest profit from trading on the trend. In the formation of the following patterns, trades are suspended, and traders are eagerly waiting for a good time to open the position.
Flags and pennants
Flags and pennants are figures that you can meet quite often. The flag visually represents a rectangle which borders were formed by two parallel lines of support and resistance. When this figure appears on the chart, you can hope for further raising or falling of the price. In addition, before the beginning of the flag always a strong leap looks like a "flag stock", the figure resembles the likeness of a real flag. The further movement of the price is determined by the direction that the flag sets.
The pennant also plays important role and quite similar with the flag. Its appearance and influence on the behavior of the trend remains the same, but the graphic form of the model itself looks more like a symmetrical triangle. Usually, it is a model that can be seen more often on the exchange market.
Triangles and their types
There are four types of triangles: descending(1), ascending(2), symmetrical(3), parting(4). Each of them has its own peculiarities, and from the precise recognition of each type of triangle, one can judge about the continuation of the existing trend or about its possible fracture.
The main feature of the descending triangle is the position of the acute angle, which is directed downwards. If, before the figure was formed, there was an upward trend, there is a chance that it would remain the same. That means that the breakout of the triangle will be directed in the opposite direction to the angle of its inclination. If an upward trend has not been seen before the figure, then the descending triangle will be the sign of the break in the direction of the downward trend. Within a symmetrical triangle, price movement can be unpredictable, but once the line is broken, you can see a clear movement in one direction so that this is a good chance to open a position.
When analyzing any of the figures, several factors should be taken into consideration, which in the future may influence the behavior of the current trend. The most important are: trend preceding the formation of the figure, the presence of support and resistance lines in this area, etc. In the actual period of pattern formation, the trade volume indicator is also important. At this time, there is no active trading, and the increase of number of transactions indicates the forthcoming breaking of the triangle - the time, suitable for opening the position. If in the period triangle formation there is a rise in prices together with an increase in the volume of trade, we can be sure about continuation of the uptrend, but the reverse trend may take place.