Bull flag
| Bull flag |
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A bull flag is an upward continuation pattern which is creating forms in the context of an existing uptrend. This model is called the bull flag because of appearance which looks like the flag at the top of a flagpole. That pattern is a short-term price pattern which moves counter (against) both:
- the intermediate-term and
- long-term trends.
That means that price is drawing back in a short-term downtrend versus the long-term and intermediate uptrend. As the stock draws back, a trader merely watches for it to find support and afterward bounce. To be considered an important bull flag, the price has to first perform a higher high in the trend. Later the higher high after formed the price pulls back and creating a higher low (this pullback is generally two to five days)[1].
Bull Flag development
Flags are noticed at the midpoint of progress in the market and are a short-term pattern for the most part. Usually, it takes between one and three weeks to expand, although this might change. The bull flag starts to unfold after an advance in price action. Commonly it is a very steep advance, where the price progress is fast, leaving a characteristic series of virtually vertical price movements on the chart. The day to day standard type candlestick which opens near the closes and the lows near the highs might be seen clearly through the forming of the flag pole. The chart with nearly no candlesticks that have shadows, is a sign of the market that is confident. The flag is created when price consolidates and stops its advance. The price action has tended to decline but the two lines have to contain the lows and highs in a slightly downward angle, forming a parallelogram which is little opposing the recent bullish activity[2].
Bear flags
This is the same as the bull flag, only with bearish implications. The pattern is helpful because it is possible to measure up the flag pole and application it as a possible price goal upon a break out from the consolidation period. The best is confirmation with the flag pattern through watching for the flash to expand and then waiting for the break out to.
Bull symmetrical triangle
This patterns signal consist of at least five points of contact with the converging lines. The value breaks out before the apex is received. As a rough guide, the break out takes places two-thirds of the way upon the pattern. Hoewer it will be different according to market conditions. In extreme circumstances that price might return to the apex[3].
Footnotes
References
- Burgess G.A., (2010)., Trading and Investing in the Forex Markets Using Chart Techniques, John Wiley and Sons
- Brooks A., (2011)., Trading Price Action Trading Ranges, Technical Analysis of Price Charts Bar by Bar for the Serious Trader, John Wiley and Sons
- Moore J., (2018)., Trading Part-Time, How to Trade the Stock Market Part-Time, Xlibris Corporation
- Swope R., Howell W. S., (2012)., Trading by Numbers: Scoring Strategies for Every Market, John Wiley and Sons
Author: Jakub Postawa
