REVERSE AND CONTINUATION PATTERNS
I like crown patterns because they signal a new trend. I really love continuation patterns (as shown in Figure 12.8
) because they keep the new trend going. This is when you let your profits run, enter a trend late because you did not spot the previous trend reversal, or if you are an advanced trader, when you can add additional lots.
DealBook® 360 screen capture printed by permission. © 2008 by Global Forex Trading, Ada MI USA
Not only that, they are clear signs of where support levels are and suggest fantastic places to put or move stop losses. Price makes a new trend, retraces a bit, and then takes off again—continuation.
Look at these great examples. Notice that the continuation patterns and crown patterns work even on the weekly charts. Yes, they work on all time frames, not just intraday charts. This shows how powerful these candle formations are. Take a look at the weekly chart in Figure 12.9
Can you see the crown pattern I’ve outlined above? This is a clear reversal signal. The chart is no longer forming lower lows and lower highs. The trend has been broken and momentum is now moving up. Now, let’s watch what happens next in Figure 12.10
You will see our crown at the bottom left corner. Look what then happened over and over again: continuation patterns! ...