Beginners Crypto Guide to Continuation Chart Patterns

Candlesticks | Chart Patterns | Technical Analysis | Trading

 

A major part of technical analysis is determining whether to buy in or sell out of a formidable crypto trade. Kenny Rogers always use to say, “know when to hold em, know when to fold em, know when to walk away, and know when to run”.

If you’re under 25, you probably have no clue what the hell I’m talking about, so just disregard my 80’s reference or go ask your dad.

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Moving on…

These crucial chart patterns help traders forecast future price movements.  It doesn’t matter which coin you’re trading, these bad boys show up all over the charts.

Continuation chart patterns DO NOT predict the future (wouldn’t that be nice). However, they do help with locating the “probability of movement” within a particular trend. I promise these powerful buy and sell signals will help you make much more accurate investment decisions. Scouts honor!

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Study the chart patterns I outline for you below. If all else fails, we can always fall back on the Dolorean and predict our way to crypto riches.

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Continuation Chart Patterns – Which Way Does it Go?

As stated above, continuation chart patterns will tell you whether price movement is going to continue moving up or down within a prevailing trend.

For example, if price movement of a downtrend trend shows signs of a continuation pattern, what do you do? If you guessed, “buy in” then keep reading. The correct answer would be…wait until a reversal pattern emerges. Alternatively you can just move onto another trade.

So let’s start things out with 6  of the more popular continuation chart patterns. Study each as if there will be a test at the end of this guide. 

Rectangle Continuation Patterns

bullish rectangleThis continuation pattern depicts sideways price movement between 2 horizontal trend lines (support and resistance) along a strong uptrend, which generally results in an overall uptrend continuation.

In order to be defined as a true bullish rectangle, price movement should touch each trend line at least two times on both support and resistance. Upon doing so, the price action should break the top trend line of resistance. Investors want to purchase the cryptocurrency when the price action closes (candlestick close) above the upper trendline.

Summary

  • Confirmation to buy – when price closes above the upper trendline.
  • Pattern confirmation – two touches on both support and resistance.
  • Percentage of time pattern reaches target – 80%.

bearish-rectangleThis continuation pattern depicts sideways price movement between 2 horizontal trend lines (support and resistance) along a strong downtrend, which generally results in an overall downtrend continuation.

In order to be defined as a true bearish rectangle, price movement should touch each trend line at least two times on both support and resistance. Upon doing so, the price action should break the bottom trend line of resistance. Investors may want to short the cryptocurrency (refer to margin trading) or sell the coin at this position for a loss.

Summary

  • Confirmation to sell – when price closes below the upper trendline.
  • Pattern confirmation – two touches on both support and resistance.
  • Percentage of time pattern reaches target – 50%.

Triangle Continuation Patterns

ascending triangleThis bullish continuation pattern is depicted by a right triangle which is created by two trend lines. The bottom trend line is drawn horizontally upward, where support prevents the price action from breaking through.

The top trend line is represented by a horizontal level which prevents the price from breaking through this resistance. Once this resistance line is broken, upward price momentum is expected to continue.

This pattern showcases that the demand for the crypto coin is increasing over time.

Summary

  • Confirmation to buy – when price closes above the upper trendline.
  • Pattern confirmation – two touches on both support and upward horizontal resistance line.
  • Percentage of time pattern reaches target – 75%.

The bullish continuation pattern is depicted by a right triangle which is created by two trend lines. The bottom trend line is drawn at a horizontal level where support prevents price action from breaking through.

The top trend line is represented by a downward horizontal line which prevents the price from breaking through this resistance. Once this resistance line is broken, downward price momentum is expected to continue. It is recommended to sell here.

This pattern showcases that the demand for the crypto coin is weakening over time.

Summary

  • Confirmation to sell – when price closes below the lower trendline.
  • Pattern confirmation – two touches on both horizontal support and downward resistance line.
  • Percentage of time pattern reaches target – 54%.

Flag Continuation Patterns

bull-flag-cryptoThis continuation pattern resembles a flag at the top of a pole. The bullish flag is a short-term continuation pattern which tells you that a temporary market consolidation is occurring before a continuation of an uptrend.

Within the pattern, the flagpole is represented by the sudden vertical spike in price as the flag portion is represented by a temporary downward consolidation against the uptrend.

Typical bullish flags are angled downward from the predominate trend, however on occasion it can be angled upwards. The continuation pattern is complete once price action breaks above the upper resistance trendline.

A typical price target is measured by adding the length of the flagpole to the price associated with the bottom of the flag.

Summary

  • Confirmation to buy – when price closes above the upper trendline.
  • Pattern confirmation – at least two touch points on both downward support and downward resistance line.
  • Percentage of time pattern reaches target – 64%.

This continuation pattern resembles an upside down flag. The bearish flag is a short-term continuation pattern which tells you that a temporary upward market consolidation is occurring before a continuation of a downtrend.

Again, the flagpole is represented by a sudden vertical dip in price as the flag portion is represented by a temporary upward consolidation against the downtrend.

Standard bearish flags are angled upward or sideways from the dominant downward trend, however on occasion it can be angled downward. The continuation pattern is complete once price action breaks below the lower trendline of support.

A typical price target is measured by subtracting the length of the flagpole to the price associated with the top of the flag.

Summary

  • Confirmation to sell – when price closes above the upper trendline.
  • Pattern confirmation – at least two touch points on both downward support and downward resistance line.
  • Percentage of time pattern reaches target – 64%.

Good Job Kid! 

You did it kiddo! You studied your ass off right? You ready for the big leagues now? Don’t get to far ahead of yourself…..there’s more. 

This is where the rubber meets the road. Apply these patterns to your favorite trading chart before claming your fame. Head on over to our Tradingview charts and get started on a few while it’s still fresh on your mind.

Once you’re comfortable with recognizing these patterns, throw a few dollars at  your favorite exchange (whatever you can manage – start slow). See if you can win a few rounds within your own crypto trading challenge. 

Remember young grasshoppa, practice doesn’t necessitate real world experience, but it sure as hell helps! 

For more kick ass trading guides along with solid fundamental analysis, check out our crypto trading page . Good luck!

If you enjoyed this guide, leave a comment below. I’d love to hear from you and the experiences you’ve had along your crypto trading journey.

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