Bearish and Bullish Flag Chart PatternsFlag Pattern:
A flag is a chart pattern formed during a counter-trend move after a sharp price movement.
Why is it called Flag?
It is named because of the way it reminds the viewer of a flag on a flagpole.
What does the Flag Pattern represent?
It signifies trend reversals or breakouts after a period of consolidation.
The five main characteristics of a Flag Pattern are:
1. The preceding trend
2. The consolidation channel
3. The volume pattern
4. A breakout
5. A confirmation occurs when the price moves in the same direction as the breakout.
How to identify the Flag Pattern:
The most important part of the flag pattern is to identify a strong trend (in either direction, as the flag may be inverted, triggering a bearish move!). Take a look at the higher time frames when you find a flag pole to ensure the price is not simply ranging. It could be meeting a large area of resistance!
Bullish Flag Pattern:
When the prices are in an uptrend, a bullish flag pattern shows a slow consolidation lower after an aggressive uptrend. This indicates that there is more buying pressure moving the prices up than down and indicates that the momentum will continue in an uptrend.
Traders wait for the price to break above the resistance of the consolidation after this pattern is formed to enter a long position.
The breakout indicates that the prior uptrend will continue.
Example of a Bullish Flag Pattern:
Bearish Flag Pattern:
When the prices are in a downtrend, a bearish flag pattern shows a slow consolidation higher after an aggressive downtrend. This indicates that there is more selling pressure moving the prices down than up and indicates that the momentum will continue in a downtrend.
Traders wait for the price to break below the support of the consolidation after this pattern is formed to enter a short position.
Example of a Bearish Flag Pattern:
Conclusion:
A flag pattern is a type of chart continuation pattern that shows candlesticks contained in a small parallelogram. When the prices are in an uptrend, a bullish pattern shows a slow consolidation lower after an aggressive uptrend. When the prices are in a downtrend, a bearish pattern shows a slow consolidation higher after an aggressive downtrend. It is formed when there is an increase in demand or supply that causes the prices to move up or down.
May you all be PROFITABLE,
