In technical analysis, continuation patterns help traders identify moments when an existing trend is likely to continue after a brief consolidation. Unlike reversal patterns, which signal a trend change, continuation patterns confirm that the prevailing trend remains intact.
This guide covers six powerful continuation patterns that traders use to spot trend-strengthening opportunities:
- Rising Three Methods – A long green candle, three small red candles, then another strong green candle.
- Falling Three Methods – A long red candle, three small green candles, then another strong red candle.
- Bullish Flag – A consolidation phase forming a downward rectangle after an uptrend.
- Bearish Flag – A consolidation phase forming an upward rectangle after a downtrend.
- Bullish Pennant – A small symmetrical triangle after a strong uptrend, leading to further upside.
- Bearish Pennant – A small symmetrical triangle after a strong downtrend, leading to further downside.
By the end of this article, you’ll understand how to spot, confirm, and trade continuation patterns effectively.
1. Rising Three Methods: Bullish Continuation Pattern
What is the Rising Three Methods Pattern?
The Rising Three Methods is a five-candle bullish continuation pattern that appears in an uptrend. It consists of:
✔ A long green (bullish) candle, showing strong upward momentum.
✔ Three small red (bearish) candles that stay within the first candle’s range, representing a brief consolidation.
✔ A strong green candle that closes above the first candle’s high, confirming the trend continuation.
Why Does It Form?
The three small bearish candles indicate that some traders are taking profits, but sellers are not strong enough to reverse the trend. The final bullish candle confirms that buyers are regaining control.
How to Trade It?
- Entry: Enter a long position after the fifth candle closes above the first candle’s high.
- Stop-Loss: Below the lowest point of the three small candles.
- Target: The next resistance level or a 1:2 risk-reward ratio.
2. Falling Three Methods: Bearish Continuation Pattern
What is the Falling Three Methods Pattern?
The Falling Three Methods is a five-candle bearish continuation pattern that appears in a downtrend. It consists of:
✔ A long red (bearish) candle, showing strong downward momentum.
✔ Three small green (bullish) candles that stay within the first candle’s range, representing a brief pause.
✔ A strong red candle that closes below the first candle’s low, confirming the trend continuation.
Why Does It Form?
The three small bullish candles show a temporary pullback, but buyers fail to push prices higher, leading to a continuation of the downtrend.
How to Trade It?
- Entry: Enter a short position after the fifth candle closes below the first candle’s low.
- Stop-Loss: Above the highest point of the three small candles.
- Target: The next support level or a 1:2 risk-reward ratio.
3. Bullish Flag: A Trend Consolidation Before Breakout
What is a Bullish Flag?
A Bullish Flag is a continuation pattern that appears after a strong uptrend, forming a small rectangular consolidation phase before breaking out higher. It consists of:
✔ A strong uptrend (flagpole) before the pattern forms.
✔ A downward-sloping rectangle (flag), where price moves within parallel trendlines.
✔ A breakout above the flag, continuing the uptrend.
Why Does It Form?
After a strong rally, some traders take profits, causing a slight pullback. However, buyers quickly regain control, pushing prices higher.
How to Trade It?
- Entry: Enter a long position when price breaks above the flag’s upper resistance.
- Stop-Loss: Below the lower boundary of the flag.
- Target: Measure the height of the flagpole and project that distance upward.
4. Bearish Flag: A Temporary Pause Before More Selling
What is a Bearish Flag?
A Bearish Flag is a continuation pattern that appears after a strong downtrend, forming a small upward-sloping rectangular consolidation before breaking lower. It consists of:
✔ A strong downtrend (flagpole) before the pattern forms.
✔ An upward-sloping rectangle (flag), where price moves within parallel trendlines.
✔ A breakout below the flag, continuing the downtrend.
Why Does It Form?
After a strong sell-off, some traders take profits, causing a temporary pullback. However, sellers regain control, leading to another leg down.
How to Trade It?
- Entry: Enter a short position when price breaks below the flag’s support.
- Stop-Loss: Above the upper boundary of the flag.
- Target: Measure the height of the flagpole and project that distance downward.
5. Bullish Pennant: A Tightly Consolidating Bullish Pattern
What is a Bullish Pennant?
A Bullish Pennant is a continuation pattern that appears after a strong uptrend, forming a small symmetrical triangle before breaking out higher. It consists of:
✔ A strong uptrend (flagpole) before the pattern forms.
✔ A symmetrical triangle, where price consolidates within converging trendlines.
✔ A breakout above the triangle, continuing the uptrend.
Why Does It Form?
After a strong rally, the market consolidates in a tighter range. Eventually, bullish momentum takes over, pushing prices higher.
How to Trade It?
- Entry: Enter a long position when price breaks above the triangle’s resistance.
- Stop-Loss: Below the lower boundary of the triangle.
- Target: Measure the flagpole’s height and project that distance upward.
6. Bearish Pennant: A Bearish Trend Ready to Resume
What is a Bearish Pennant?
A Bearish Pennant is a continuation pattern that appears after a strong downtrend, forming a small symmetrical triangle before breaking lower. It consists of:
✔ A strong downtrend (flagpole) before the pattern forms.
✔ A symmetrical triangle, where price consolidates within converging trendlines.
✔ A breakout below the triangle, continuing the downtrend.
Why Does It Form?
After a sharp decline, the market consolidates, but sellers eventually regain control, leading to another wave of selling.
How to Trade It?
- Entry: Enter a short position when price breaks below the triangle’s support.
- Stop-Loss: Above the upper boundary of the triangle.
- Target: Measure the flagpole’s height and project that distance downward.
Final Thoughts: Mastering Continuation Patterns
Understanding continuation patterns helps traders recognize opportunities to trade with the trend instead of against it. However, for maximum accuracy, traders should:
✔ Wait for breakout confirmation before entering trades.
✔ Use volume analysis to validate patterns.
✔ Combine continuation patterns with trendlines, moving averages, and RSI for stronger signals.
By mastering these six continuation patterns, traders can confidently identify trend-strengthening opportunities and improve their trading success.
