Attributes of Price Patterns

[admin]

Attributes of Price Patterns
All price patterns are made of the following four pieces:

Old trend: the trend that the stock is in as it starts to form the price pattern
Consolidation zone: a constrained area defined by set support and resistance levels where the trend is undefined or channeling
Breakout point: the point which the stock breaks the consolidation zone
New trend: the trend the stock enters coming out of the consolidation zone

Price Pattern Attributes
Types of Price Patterns
Price patterns are divided into two major categories: continuation patterns and reversal patterns.

Continuation patterns tell you that the new trend is going to continue in the same direction that the old trend was moving. [Learn more about continuation patterns here.]

Reversal patterns tell you that the new trend is going to reverse directions and move in the opposite direction that the old trend was moving. [Learn more about reversal patterns here.]

The only real difference between continuation patterns and reversal patterns is which direction the new trend is moving. Both types of patterns have an old trend, a consolidation zone, a breakout point and a new trend.