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.