1990issue C111-7
Constructing continuation patterns from congestion geometry
Lock a post-impulse pause as congestion, classify the geometry as a flag, pennant, continuation head-and-shoulders, or symmetrical triangle, and keep a volume sequence that can invalidate the breakout hypothesis.
- Construct congestion only after a rapid advance or decline leaves buying and selling in temporary balance, often with a visible volume increase at the shift from trend to range.
- Draw a trading-range only after repeated highs and lows support horizontal bounds, then classify the pause as a flag, pennant, continuation head-and-shoulders, or symmetrical triangle.
- Require the matching volume sequence: heavy into the prior impulse and lighter during the pause for flags and pennants, fading from the left shoulder to the right for continuation head-and-shoulders, and expanding on exit.
- Treat a symmetrical-triangle exit as valid only on a close beyond a slanted side by at least 5 percent of the largest internal span, typically about two-thirds of the way to the tip.
Build congestion before naming a pattern
A trend pause is constructed as congestion when buying and selling temporarily balance after a rapid advance or decline. Directional momentum is absorbed in that pause, and the shift from trend to range is often marked by a visible volume increase.
A trading-range is constructed only after prices have oscillated long enough for horizontal lines to be drawn through a repeated high and a repeated low. Those repeated extremes become the congestion bounds. Editorial reading: classify the pause only after those bounds can be locked.
Read demand inside the pause
After a high-volume buying peak, a second advance on weak volume is treated as fading demand. A later bounce with high volume and a close toward the upper side of the session is treated as demand absorbing supply.
After the upper bound is exceeded, holding those gains as volume contracts is treated as evidence that the stronger side still controls the market.
Construct a flag or pennant
A flag is constructed with near-parallel boundaries that may slant. A pennant is constructed with converging boundaries. Both typically follow a sharp move and appear mainly on daily rather than weekly charts.
Flag and pennant construction uses heavy volume into the prior impulse, lighter volume during the pause, and expanding volume on exit. A measured-move working rule treats the next leg as able to match the distance traveled before the pause.
Construct continuation head-and-shoulders
Head-and-shoulders geometry is constructed as continuation when the formation points against the prevailing trend rather than with it. During an advance, the inverted outline is reaccumulation, constructed as stronger buyers adding inventory. During a decline, the upright outline is redistribution, constructed as larger holders selling into the counterswing.
In that continuation construction, conventional measured-move targets are treated as unreliable. Volume typically fades from the left shoulder to the right and is expected to expand on breakout.
Construct a symmetrical triangle
A symmetrical triangle is constructed from two slanting sides that need not share the same angle. It can appear on charts of any timeframe and is distinguished from reversal triangles that keep one side horizontal.
A valid triangle breakout is a close beyond either slanted side by at least 5 percent of the largest high-to-low span inside the formation. That exit is typically expected about two-thirds of the way to the tip. An exit through the tip is treated as loss of pattern significance.
All readings on this track · 5 readings
- 1990Constructing continuation patterns from congestion geometry
- 1996Construct the coil first, then time the apex and the measured move
- 1998The triangle is a waiting room until a two-touch line breaks
- 2004Construct a mechanical rank for triangular formations
- 2004Compact structure as a two-step candlestick and triangle test