Continuation Patterns

As the Japanese say: "When it is time to sell – sell, when it is time to buy – buy, when it is time to rest – rest". Most of the continuation patterns signal that the market has resumed the trend taken before the continuation pattern emerged.

Gaps

When bar low is above the prior bar high, or when bar high is below the prior bar low we see the formation of a price gap. In the future gaps will be support or resistance levels. If prices rebound and gapping disappears but opposite to the prevailing trend market participants are still aggressive then wait for the reversal. As a rule once the gap is formed price moves back so it is a good time to initiate a position. Place Stop Loss orders under (above) the gap when opening a buy (sell) position.

Analysis rules:

• If once a gap has appeared and you have register from eight to ten rising highs (falling lows) then wait for the correction. As in the Japan saying: "Stomach is 80% full".
• If gap is not closed within next three bars then wait that the market will move in the gap direction.
• Once three gaps have been formed upward (downward) wait for the high (bottom). Once the third gap has formed and you see the reversal pattern the prevailing trend is about to change.

THE UPWARD- AND DOWNWARD-GAP TASUKI PATTERN

Upward-Gap Tasuki is a continuation pattern when after the white candle, which forms the gap upward, the black candle emerges as a rebound to the gap. The black candle opens within the white real body and closes below the real body.

The close on the black candle is the point of purchase. Place a Stop Loss order under the gap.

The Downward-Gap Tasuki pattern is an opposite to the Upward-Gap Tasuki pattern.

Upward- and Downward-Gap Tasuki:

The real bodies of the black and white candles are almost the same. On FOREX these patterns are rare.

HIGH-PRICE AND LOW-PRICE GAPPING PLAYS

If after a rapid rally price reaches and stops near support or resistance levels several small bodied candles are being formed, and then upward gap appears, this kind of pattern is called the High-price Gapping Plays. This pattern shows that bullish trend has resumed so it is time to buy.

High-price and Low-price Gapping Plays;

Low-price Gapping Plays is an opposite to the High-price gapping Plays pattern: