How to draw trendlines methodically for Continuation Patterns (CP)?

How to draw trendlines methodically for Continuation Patterns (CP)?

How to draw trendlines methodically for Continuation Patterns (CP)?

 

Rules for drawing Trendline for CP:

  • Rules for drawing Trendline for CP is different from drawing trendlines for Valley’s and Peak’s.
  • Most importantly, A Continuation Patterns can’t be used with valley and peak to form a trendline.
  • It’s possible to see CPs before a new valley is printed. They will be irrelevant on how we draw trendlines since we are not allowed to use them to connect trendlines.
  • We’ll only use CPs to draw a more aggressive trendline when 3 or more consecutive CPs have been created.
  • So, we can create trendlines using 2 valley’s, 2 peaks or 3 CPS. As simple as that. You cannot form trendline using 1 valley and 1 or 2 CPs, likewise you can’t draw trendline using 1 peak and 1 or 2 CPs.
  • We can create Trendline if we find 3 CPs in the chart continuously. Once the 3rd CP is created, we’re allowed to draw a more aggressive trendline by connecting them since we’ll consider price is probably over extended.
  • Once this agressive trendline is broken, a new supply/demand zone will be created.

When Over-Extension Is Resetted

  1. If price has been printing 3 or more consecutive CPs, we’ll consider that that timeframe might be in over-extension.
  2. If after a series of consecutive CPs price creates a new valley, over-extension will be resetted and we’ll be allowed to draw a new trendline connecting latest two valleys

 

For more details and examples, checkout the video:

https://youtu.be/5RoA_2lWCDI

 

Feel free to ask if you have any queries…

 

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