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
- If price has been printing 3 or more consecutive CPs, we’ll consider that that timeframe might be in over-extension.
- 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:
Feel free to ask if you have any queries…