This is the second part of chart patterns. In this article, you are going to learn about Bearish Continuation Chart Patterns. In the first part, you learned about Bullish Continuation Chart Patterns.
What are Bearish Continuation Chart Patterns?
When the price of a security falls, it is said that it’s a bearish movement. Price doesn’t move in a single direction, it always takes a small reversal or pauses. After small reversals or pauses price continues it’s direction.
These small reversals and pauses in downtrend makes patterns. And these patterns are called as Bearish Continuation Chart Patterns.
Chart Patterns
1. Bearish Flag
First, you will see a strong downside movement, which shows the selling pressure. Then you will see, stock will trade sideways for some time. The portion between black lines. Here traders are booking their profit.
In this part, you will see very small and weak candles, which shows weakness in the buying. Support and resistance line will be parallel to each others, which shows buying and selling is happening with equal amount.
After breakout, you will see the movement like first strong move.
You can enter into trade, after breakout of the support line. Your stop loss will be the above recent high and your target will be equal to first strong movement.
2. Triangle Pattern
There are many triangle patterns such as symmetrical triangle, descending triangle, etc. But they all works the same way.
Here also, first you will see a strong downside move. Which indicates sellers are strongly selling it. Then you will see a triangle like formation. Here traders are booking their profits and new trader are waiting for the opportunity.
When triangle will start formation and time will pass, you will see the price will start narrowing from buyers and sellers also. The shows both buyers and sellers are aggressively trading. You can see the portion between black lines.
You can enter into trade after breakout of the support line. Your stop loss will be above the recent high and your target will be equal to first move.
3. Wedge Pattern
Wedge is also a bearish continuation pattern. First move will be strong, which shows selling pressure. Then you will see a small reversal, which shows profit booking from other traders.
Here, support and resistance will not be parallel to each other, resistance line will be less sloppy as compare to support line. This shows buyers are losing momentum and sellers are not ready to give up easily. A portion between two black lines shows this.
You can enter into trader after breakout of the wedge pattern. Your stop loss will be above recent lhigh and your target will be equal to first move.
4. Rectangle Pattern
As a name suggest, this pattern will look like a rectangle. First there will be a strong downside move. Then you will see a rectangle like pattern. Here traders are booking their profits and other traders are waiting for new entry. In rectangle, price will move in between support and resistance line. You can call these lines supply and demand lines also. Here buyers and sellers will be equal.
After upside breakout, you can enter into trade. Your stop loss will be above the recent high and your target will be equal to the first move.
Final Thoughts
If you have read both previous articles, you will trade continuation patterns easily. If you want to get good and bigger moves, then learning about the continuation patterns must for you.
Next articles, you will learn about Bullish Reversal Patterns.