Continuation

What is Continuation?

Continuation is the resolution of a pause in the direction of the prevailing trend: an impulse leg runs, price digests through a pullback, flag, or range, and the next leg then breaks out the same way the last one pointed. The term covers both the event (the resumption itself) and the family of patterns that tend to precede it, such as flags, pennants, and triangles, where contracting range and thinning volume mark a rest rather than a fight.

The working assumption behind continuation trading is that trends persist more often than they reverse at any given pause, so the burden of proof sits on reversal. That assumption fails regularly in practice: pauses do become tops and bottoms, which is why continuation setups are judged by whether trend structure survives the pause (shallow retracement, prior swing intact) rather than by the pattern's shape alone.

How traders use it

• As the third stage of the breakout, pullback, continuation sequence: entries are taken as the pause resolves trendward, with stops beyond the pause's extreme.
• As a bias check: while a pullback holds above the prior swing and volume contracts, traders keep working the trend side and treat counter-trend signals as suspect.
• As an add-on point for existing winners, committing more size only after the trend proves it is resuming.