**Education** **Reversal patterns, continuation patterns and chart patterns**\\ \\ Discover the many important continuation and reversal patterns that all traders should know.\\ \\ Read more →

[](https://my.axi-solaris.com/login)[](https://clientportal.axi-solaris.com/) [Home](https://www.axi-solaris.com/eu) / [Blog](https://www.axi-solaris.com/eu/blog) / [Education](https://www.axi-solaris.com/eu/blog/education) / Continuation Reversal Patterns # Reversal patterns, continuation patterns and chart patterns ###### Education / ###### [Milan Cutkovic](https://www.axi-solaris.com/eu/blog/authors/milan-cutkovic) - [Education](https://www.axi-solaris.com/eu/search-results?stype=blogtags&search=Education) - [Continuation](https://www.axi-solaris.com/eu/search-results?stype=blogtags&search=Continuation) - [Reversal](https://www.axi-solaris.com/eu/search-results?stype=blogtags&search=Reversal) - [Patterns](https://www.axi-solaris.com/eu/search-results?stype=blogtags&search=Patterns) Technical analysis is a broad term we use when we’re examining market data to try and predict future price trends. An important part of any trader's technical strategy is the use of technical indicators. These pattern types are easily spotted by traders but sometimes they can struggle to decide whether the signal they’re seeing is valid or not. Therefore, it can be beneficial to use additional tools to filter them. But before you dive into the world of continuation and reversal patterns, it's important to be well-acquainted with some relevant trading knowledge, such as [how to read candlestick patterns](https://www.axi-solaris.com/eu/blog/education/candlestick-patterns) and what is the [difference between bullish and bearish markets](https://www.axi-solaris.com/eu/blog/education/bull-vs-bear-market). Keep reading to learn how to predict price trend continuation using common reversal and continuation patterns. ## Table of contents - [What is a chart pattern?](https://www.axi-solaris.com/eu/blog/education/continuation-reversal-patterns#what-is-a-chart-pattern) - [What are continuation patterns?](https://www.axi-solaris.com/eu/blog/education/continuation-reversal-patterns#what-are-continuation-patterns) - [What are reversal patterns?](https://www.axi-solaris.com/eu/blog/education/continuation-reversal-patterns#what-are-reversal-patterns) - [How to use those patterns in your trading](https://www.axi-solaris.com/eu/blog/education/continuation-reversal-patterns#how-to-use-those-patterns-in-your-trading) ## What is a chart pattern? A [chart pattern](https://www.axi-solaris.com/eu/blog/education/shares/stock-chart-patterns) (or price pattern) is an identifiable movement in the price on a chart that uses a series of curves or trendlines. These patterns may repeat and occur naturally due to price action, and when they can be identified by market analysts and traders, they can provide an edge to [trading strategies](https://www.axi-solaris.com/eu/blog/education/trading-strategies) and help them beat the market. Like the majority of price patterns, there are four key elements that are needed to form the pattern: - **Old trend**: The old trend is the trend that the instrument price is in as the new pattern begins to form. - **New trend**: The new trend is the reversal of the old trend that the instrument’s price becomes when it exists out of the consolidation zone. - **Consolidation zone**: The consolidation zone is the constricted area recognised by the support and resistance levels. - **Breakout point**: The breakout point is the point at which the instrument’s price breaks out of the consolidation zone. Chart patterns are an important part of [technical analysis](https://www.axi-solaris.com/eu/blog/education/technical-analysis) that every avid trader should understand so as to improve how they view and operate in the market. ## What are continuation patterns? Continuation patterns are price patterns that show a temporary interruption of an existing trend. For example, the price of an asset might consolidate after a strong rally, as some bulls decide to take profits and others want to see if their buying interest will prevail. Most traders will wait for a [breakout](https://www.axi-solaris.com/eu/blog/education/breakout-trading-strategy) above/below the line of resistance/support as a confirmation that the trend is resuming, and enter a position in the same direction. When setting stop loss and [take profit](https://www.axi-solaris.com/eu/blog/education/profit-taking-strategies) orders, many traders place the stop slightly above or below the chart formation, while the take profit order depends on the pip range within that pattern. For example: If the [pip value](https://www.axi-solaris.com/eu/blog/education/forex/pips-pipettes) of the consolidation within the rectangle is 30 pips, a trader who wants to keep a risk-reward ratio of at least 1:1 might target 30 pips as a take profit target. The most common continuation patterns are: - Rectangle patterns - Triangle continuation patterns - Pennant patterns - Wedge patterns - Cup and handle patterns _**Tip: Continuation patterns can be identifiable as both bullish and bearish signals.**_ ### Rectangle patterns Rectangle patterns are formed when the price is hitting horizontal support and resistance levels, several times. The price is therefore constricted, bouncing between the horizontal levels and creating the shape of a rectangle. The price will eventually break out and the trend will follow that direction, either an upward or downward movement. _Bullish rectangle and bearish rectangle patterns_ ### Triangle patterns [Triangle patterns](https://www.axi-solaris.com/eu/blog/education/triangle-patterns) are a commonly used continuation pattern by technical analysts. There are three variations of triangle patterns and they are all important to learn because they can help identify the continuation of a bullish or bearish market. They are symmetrical triangles, ascending triangles, and descending triangles. The triangle begins forming with its widest point, and as the market keeps moving sideways the range of trading narrows, completing the full formation of the triangle at its apex. This chart pattern is often described as a horizontal trading pattern and is similar to wedges and pennants, where bullish or bearish movement can signal a continuation or reversal of the previous trend direction. **Ascending triangle:** The [ascending triangle](https://www.axi-solaris.com/eu/blog/education/ascending-triangle-pattern) typically breaks out in the same direction as the trend was going just prior to where the triangle formed. **Descending triangle:** The [descending triangle](https://www.axi-solaris.com/eu/blog/education/descending-triangle-pattern) shows traders that the demand for an asset is weakening as the price breaks below the low support levels, with downward momentum likely to continue. **Symmetrical triangle:** The [symmetrical triangle](https://www.axi-solaris.com/eu/blog/education/symmetrical-triangle-pattern) continuation pattern shows a consolidation period before the price sees a breakout or breakdown, starting a new bullish or bearish trend.  _Bullish and bearish symmetrical, ascending and descending triangle patterns_ ### Pennant patterns Pennant patterns form the shape of a flag or triangle on the chart and occur when price movements are becoming tighter and tighter between the support and resistance levels as time moves on. This pattern is generally considered a pennant when there are at least five touches of support and resistance. Similar to rectangle patterns, the pennant continuation pattern can be formed from bullish or bearish price movements.  _Bullish and bearish pennant_ ### Wedge patterns A wedge price patt