When crypto price action comes to a halt and stagnation it might seem impossible to predict whether it will return to its original way or reverse and start going the other direction. Thankfully, when applied properly, continuation candlestick chart patterns can help guess the next steps of price, and while no analysis guarantees results, it has the potential to significantly boost traders’ odds for success. Read on to find out all you need to know about the most popular continuation patterns and see how to identify them.
Continuation patterns are popular among traders as they can signal that the either bearish or bullish price action that was present before the pattern will continue its course once the formation closes. Such patterns gain even more importance than usual in an untested bear or bull market territory where prices have never been before and investors are not confident about support or resistance levels.
In general, there are two types of continuation patterns, namely bullish and bearish formations. As their names suggest, bullish continuation patterns indicate an upcoming bullish movement, while the bearish formations signal an upcoming, continued downtrend.
The Falling Wedge is probably the most commonly used continuation pattern of all, as it’s relatively simple to spot and is reliable most of the time. A Falling Wedge occurs after a strong bullish price action, and begins with a significant sell-off, albeit one that does not cancel all prior gains. After a seller push, a positive, but lower high price jump follows, then a lower low, lower high, and the pattern goes on. This indicates that sellers are trying to push the price down, but their efforts are always countered by buyers who slowly exhaust seller pressure which is visible from the lower lows.
A Bullish Rectangle is a typical, stagnating pattern, where price action seems indecisive about its next move. The pattern is relatively easy to spot, as prices trade perfectly sideways in a given range with equal highs and lows. The issue with this pattern is that it’s hard to predict which seller pressure will eventually result in a breakout and the continuation of bullish price action.
A Rising Wedge pattern is the opposite of the Falling Wedge. As such, it indicates that prices will continue their prior bearish action once the pattern is completed. A Rising Wedge can be recognized similarly to a Falling Wedge, but with higher highs and higher lows, with prices trading in a somewhat closing up range. The pattern indicates that sellers are not letting buyers take control and reverse the prior bearish action, despite buyers’ several, yet each time weaker attempt to do so.
Last, but not least, a Bearish Pennant is among the shortest continuation patterns, thus one must be relatively quick to spot it and react accordingly. A Bearish Pennant can be recognized from its signature range which forms a sideways triangle, or flag-shaped pattern once the lows and the highs are connected. This pattern indicates that sellers are more confident than they would be during a Rising Wedge, and they break down buyers’ push quickly and brutally. This results in buyers losing hope and, after only a few attempts, they let prices go.
Bearish and bullish continuation patterns can be very useful in predicting the next major direction of prices, however, one must pay careful attention to which pattern they see exactly, and when it is time for a breakout that will actually set prices back on their previous course.
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