Continuation Patterns

Level 2
Continuation Patterns
Introduction
3 Monkeys
Gaps
Level 2

Introduction
Introduction
Most candlesticks are trend reversals, however, we cannot overlook the
power of trend continuations. They are extremely necessary to
visualize and understand the complete picture. A continuation
pattern, of course, is when the market should continue on the same
path as before the pattern.

 Example: If the market is bearish and you spot a continuation

pattern, it should signal to you that the bearish trend will continue.

Note: If the trend doesn’t continue, be patient it could just be a market

correction due to a bullish push. Be confident and wait for it to
continue, then enter or increase your position and take the market!
In This Section…
In this section, we will discuss continuation
patterns. Continuation patterns are signals that
help us recognize when a trend will continue.
The continuation patterns that we will discuss
are:

The 3 Monkeys
Gaps
Triangles
Lesson 2

3 Monkeys
3 Monkeys
In this section, we will be discussing the 3 monkeys
continuation pattern. The pattern includes the 3 monkeys
(bullish) and the 3 monkeys (bearish); both are
continuation patterns. These patterns should be used to:

 If in a trade; signal you to disregard the market

correction and continue the trade.
 If in a trade; signal you to disregard the market
correction and increase your position after the pattern
has been completed.
 If out of the market; signal you of an entry position after
the pattern has been completed.
The 3 Monkeys (Bullish)
For this pattern, the market should be in
an uptrend. The 3 monkeys
(bullish) pattern is:

1. A long (real body) green candlestick.

2. Then, a group of 3 or more bearish
or lateral small real body
candlesticks; that stay within the
high and low of the long green
candlestick.
3. Next, another long (real body) green
candlestick; that opens above the
previous candlestick’s close and
closes above the first long green
candlesticks close.

Note: The 3 small bodies can be any color,

however, the pattern is more likely to be
an accurate indicator if they are all red.
Example of 3 Bullish
Monkeys
The 3 Monkeys (Bearish)
For this pattern, the market should be in
an downtrend. The 3 monkeys
(bearish) pattern is:

1. A long (real body) red candlestick.

2. A group of 3 or more bullish or
lateral small real body candlesticks;
that stay within the high and low of
the long red candlestick.
3. Another long (real body) red
candlestick; that opens below the
previous candlestick’s close and
closes under the first long red
candlesticks close.

Note: The 3 small bodies can be any color,

however, the pattern is more likely to be an
accurate indicator if they are all green.
Example of 3 Bearish
Monkeys
Recap of the 3 Monkeys
The pattern must be accurate:

 The first candlestick body must be long (tall).

 The 3 monkeys must be all small body candlesticks.
 The 3 monkeys must be trending in the opposite direction of the
previous trend.
 The 3 monkeys should all be the opposite color of the first long
candlestick.
 The 3 monkeys must be within the high and low of the first long
candlestick.
 The last long candlestick must be long and the same color as the
first long candlestick.

Note: The pattern works best if the last monkey is a doji.

Level 2

Gaps
Gaps
In this section, we will be discussing gaps and
patterns containing gaps. Gaps occur when the
market is moving faster than the candlestick
chart. As result, a hole (or price vacuum) will
appear in the chart. Gaps are continuation
signals. They signal you to “position yourself in
the same direction as the gap”. There are two
types of gaps:

Rising gaps – which are bullish signals

Falling gaps – which are bearish signals
How to Use Gaps
Gaps should be used to:

 If in a trade; to continue with the trade if you are going with the gap and
discontinue the trade if the gap is going against you.
 If in a trade going with the gap; a signal to increase your position after the
gap.
 If not in the market; signal a good entry position after the gap.
 Be patient and see the whole pattern. The market may retrace or
continue the trend immediately, so get the whole picture before you make
your move.
 Offer support and resistance areas.
1. A rising gap should give you a support level. If a candlestick closes under the gap,
the support level is broken and the uptrend could be over. Keep in mind, the bottom
of the rising gap is the support level.
2. A falling gap should give you a resistance level. If a candlestick closes above the
gap, the resistance level is broken and the downtrend could be over. Keep in mind,
the top of the falling gap is the resistance level.
Rising Gaps
During an uptrend, a
rising gap signals a
continuation of that
uptrend and offers a
support level.
Example of a Rising Gap
Falling Gap
During a downtrend, a
falling gap signals a
continuation of that
downtrend and offers
a resistance level.
Example of a Falling Gap
Recapping Gaps
 The trend must be moving in the same direction as
the gap.
1. If the trend is bullish the gap must be rising.
2. If the trend is bearish the gap must be falling.
 In order for a gap to exist, there must be a complete
price vacuum. There cannot be any overlapping of
the two candlesticks.
 Gaps can offer support and resistance levels, no
matter the size of the gap.
 Be patient and read all the signs. The market may try
to retrace before continuing the trend.
Level 2

Triangles
Example of a Bullish
Triangle
Example of a Bearish
Triangle