Learn · Chapter 05 of 09
Continuation patterns
Trends pause before they resume. Flags, pennants, triangles and rectangles are those pauses — learn to distinguish a healthy flag from distribution, and how volume should behave inside each.
Core · 4 lessons · 12 min read
Key takeaways
- Continuation patterns need a real prior trend (the pole matters more than the flag).
- Contracting volume inside + expanding volume on break = healthy.
- Time-box flags and pennants — stale pauses become reversals.
Lesson 1
Bull and bear flags
- Sharp pole + tight downward-sloping channel (bull flag) = brief profit-booking inside an uptrend.
- Flag should resolve within 1–3 weeks on daily charts; longer flags lose momentum.
- Volume contracts inside the flag and expands on the breakout — non-negotiable.
Lesson 2
Pennants and wedges
- Pennant = small symmetrical triangle after a pole; resolves faster than a flag.
- Rising wedge in an uptrend warns of weakening momentum — treat as caution, not automatic short.
- Falling wedge in a downtrend often resolves upward; wait for the break either way.
Lesson 3
Triangles: ascending, descending, symmetrical
- Ascending triangle (flat top, rising bottom) leans bullish; descending mirrors bearish.
- Symmetrical triangles are neutral — trade the break direction, not a prediction.
- Three or more touches per trendline = meaningful pattern; two touches = tentative.
Lesson 4
Rectangles and volume rules
- Rectangle = equal buying/selling; breakout direction follows the prior trend roughly two-thirds of the time.
- False breaks spike on results days — require a daily close outside plus next-day follow-through.
- Measured move = pattern height projected from breakout; scale out partially there.
Mistakes that cost money
- Buying a 'flag' that is actually a slow distribution top with expanding down-volume.
- Trading symmetrical triangles directionally before the break.
- Chasing a breakout 5%+ beyond the trigger without waiting for an intraday pullback.
Chapter FAQ
Flag vs pennant — does it matter?
Marginally. Flags are rectangular pauses, pennants triangular. Both mean the same thing: sharp move, brief rest, likely resumption. Trade them identically.
How long should a flag last?
On daily charts, roughly 5–15 sessions. Shorter is stronger; flags dragging past a month usually morph into ranges or reversals.
Do continuation patterns work on intraday charts?
Yes on 15-minute charts during trending Nifty days — especially flags in the first two hours. On range days they chop; check Bank Nifty/Nifty trend first.
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