What you will learn
- Explain what a continuation pattern is
- Tell apart ascending, descending, and symmetrical triangles and their bias
- Recognize flags and pennants and the flagpole that precedes them
- Treat patterns with skepticism, using volume and risk management
Beyond individual candles and indicators, technical analysts watch for larger shapes that price traces out over many periods, called chart patterns. This lesson covers a family of continuation patterns, formations that suggest the existing trend is pausing to catch its breath before resuming in the same direction. They reflect a temporary balance between buyers and sellers within an ongoing trend, built from the support and resistance you already know.
The ultimate triangle chart pattern strategy (Wysetrade)
Covers all three triangle patterns clearly for beginners. Watch for how the shape of the converging lines hints at who is gaining control.
Triangles
Triangles form when the price range narrows over time, with the highs and lows converging toward a point, reflecting a market coiling as buyers and sellers reach a temporary standoff. There are three common varieties.
- An ascending triangle has a flat upper resistance line and a rising lower support line, as buyers grow more aggressive and push the lows higher against a fixed ceiling. It is generally considered bullish, often resolving with a breakout upward.
- A descending triangle has a flat lower support line and a falling upper resistance line, as sellers press the highs lower against a fixed floor. It is generally considered bearish, often resolving with a breakdown lower.
- A symmetrical triangle has both lines converging, with lower highs and higher lows, reflecting indecision. It is usually treated as a continuation pattern that resolves in the direction of the prior trend, confirmed by the eventual breakout.
Key terms
- Continuation pattern
- A formation suggesting the current trend is pausing before resuming in the same direction.
- Ascending triangle
- Flat top, rising support. Generally bullish.
- Descending triangle
- Flat bottom, falling resistance. Generally bearish.
- Flagpole
- The sharp, strong price move that precedes a flag or pennant.
| Triangle | Shape | Usual bias |
|---|---|---|
| Ascending | Flat top, rising support | Bullish |
| Descending | Flat bottom, falling resistance | Bearish |
| Symmetrical | Both lines converging | Continues the prior trend |
Match the triangle to its bias
Pair each triangle with its shape and usual bias.
Flags and pennants
Flags and pennants are short-term consolidation patterns that appear after a sharp, strong price move, which traders picturesquely call the flagpole. After the sudden move, price pauses and drifts in a small, tight range, a brief rest before the trend continues. A flag looks like a small rectangle that slopes gently against the prior move, and a pennant looks like a tiny symmetrical triangle. Both are continuation patterns, suggesting the powerful move that preceded them is likely to resume after the pause.
A continuation pattern is a pause in the trend. The prior trend made the run, and the pattern is the rest before it runs again.
Master the bull and bear flag pattern (Mind Math Money)
A focused explanation of flag continuation patterns and how they are traded. Watch for the flagpole, the pause, and the breakout.
Breakouts and confirmation
The key event with any of these patterns is the breakout, when price finally exits the pattern. The direction of the breakout indicates the likely direction of the next move, and as with all breakouts, confirmation from strong volume increases confidence that the move is genuine rather than a false probe. A breakout on weak volume is more prone to failing, exactly the volume lesson from before applied to patterns.
Read the ascending triangle
During an uptrend, a stock forms an ascending triangle: it keeps stalling at 100 (a flat ceiling) while its pullback lows keep rising. What does this shape suggest, and what would confirm it?
An ascending triangle, with rising lows pressing against a flat ceiling, is generally bullish. An upward breakout on strong volume would confirm the continuation.An honest word about patterns
Patterns deserve a strong dose of the skepticism from the first lesson. Identifying them is subjective, and different analysts will draw the lines differently on the same chart. Patterns fail regularly, breaking in the opposite direction from what their name suggests. There is also a danger of hindsight bias, where patterns look obvious and reliable after the fact but are much harder to trade in real time. Treat chart patterns as loose probabilistic guides that must be confirmed by other evidence and protected by risk management, never as reliable predictions in their own right.
Hindsight makes patterns look easy
Explain in a sentence or two why a chart pattern can look obvious and reliable after the fact but be much harder to trade in real time.
Write an answer before comparing it with the model response.
Model answer
In hindsight you can see how the pattern resolved, so the winning breakout looks obvious and you conveniently ignore the many times a similar shape failed. In real time you do not know whether the pattern will break the way its name suggests, reverse, or never complete, and different analysts draw the lines differently. That is why patterns are only loose probabilistic guides that need confirmation and strict risk management.
Triangles and flags suggest a trend will continue. The next lesson covers the most famous reversal pattern, which suggests a trend is ending: head and shoulders.