Continuation patterns are formed when the price enters a consolidation or correction phase during a trend and indicate that the continuation of the preceding trend is highly probable. The existence of an existing trend is a prerequisite for a continuation pattern as there must be some trend that will continue after the pattern is completed. If there is no preceding trend, then the pattern is not a valid continuation pattern. Valid continuation patterns include the cup and handle pattern, flags and pennants, symmetrical triangles, ascending triangles and descending triangles, and the rectangle pattern.
This section covers classical Western continuation patterns found on bar chart and candlestick charts. Japanese candlestick continuation patterns differ from Western continuation patterns. Click here for a discussion on Japanese continuation patterns.