Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

A continuation pattern in technical analysis is characterized by the idea that the prevailing trend is likely to persist after a brief pause. Such patterns typically emerge after a significant price movement and indicate that the market is consolidating before resuming in the same direction.

This is crucial for traders because it helps them identify potential entry points aligned with the existing trend, thus taking advantage of the momentum. Examples of continuation patterns include flags, pennants, and triangles, which suggest that after this period of consolidation, the price will continue moving in the direction of the prior trend.

While the other options describe different patterns or market behaviors, they do not accurately depict a continuation pattern. For instance, reversal patterns indicate a change in trend direction rather than the continuation of the current trend. Patterns that form after consolidation can sometimes indicate a reversal or continuation, but the essence of a continuation pattern is specifically about the expectation of the trend continuing. Lastly, market corrections are generally seen as brief pullbacks in an overall trend rather than a definition of a continuation pattern.