Education
BULLISH FLAG PATTERN EXPLAINED.
Updated
Bullish flags are a continuation pattern found in stocks with a strong uptrend. As can be observed, the pattern resembles a flag
on a pole. The vertical rise forms the pole and the following period of consolidation forms the flag. The flag can be a horizontal rectangle
but mostly angles down from the pole. The focus should be more on the underlying psychology of the pattern than the shape. Despite the
strong vertical rally, the stock refuses to drop much because the bulls are buying as many shares they can get their hands on.
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Main characteristics of a flag pattern:
1. The trend before the appearance of the pattern.
2. The channel of consolidation.
3. The volume behavior.
4. The breakout.
5. The confirmation of price movement in the direction of the breakout.
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Target and Volume:
The target for a bull flag is calculated by measuring the length of the flag pole and projecting it from the breakout point. The volume
starts to pick up towards the end of the consolidation range indicating the oncoming breakout. Then there is a huge increase in volume
when the pole is being formed and the volume tapers off during the consolidation period.
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Stop Loss Options:
1. Longer term traders may place their stop loss below the entire flag.
2. A stricter option would be just below the consolidation are before the breakout.
3. The tightest option would be a two bar low trailing stop.
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Thoughts:
No one can know for sure which way the price will move, whether it will continue or reverse. One can follow the action of price,
trade only the best setups and let the probabilities work out. While patterns may give false signals, bullish flags are generally reliable
and effective.
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Alert:
Keep an eye out for price action unravelling currently. Price is pulling back to the 20 EMA, forming a consolidation, a flag of sorts.
A continuation candle near the average with decent volumes could be the sign of a fresh move upwards.
_____________________________________________________________________________________________________________________
Will be very grateful for a like and follow. :)
on a pole. The vertical rise forms the pole and the following period of consolidation forms the flag. The flag can be a horizontal rectangle
but mostly angles down from the pole. The focus should be more on the underlying psychology of the pattern than the shape. Despite the
strong vertical rally, the stock refuses to drop much because the bulls are buying as many shares they can get their hands on.
________________________________________________________________________________________________________________________
Main characteristics of a flag pattern:
1. The trend before the appearance of the pattern.
2. The channel of consolidation.
3. The volume behavior.
4. The breakout.
5. The confirmation of price movement in the direction of the breakout.
_______________________________________________________________________________________________________________________
Target and Volume:
The target for a bull flag is calculated by measuring the length of the flag pole and projecting it from the breakout point. The volume
starts to pick up towards the end of the consolidation range indicating the oncoming breakout. Then there is a huge increase in volume
when the pole is being formed and the volume tapers off during the consolidation period.
______________________________________________________________________________________________________________________
Stop Loss Options:
1. Longer term traders may place their stop loss below the entire flag.
2. A stricter option would be just below the consolidation are before the breakout.
3. The tightest option would be a two bar low trailing stop.
______________________________________________________________________________________________________________________
Thoughts:
No one can know for sure which way the price will move, whether it will continue or reverse. One can follow the action of price,
trade only the best setups and let the probabilities work out. While patterns may give false signals, bullish flags are generally reliable
and effective.
______________________________________________________________________________________________________________________
Alert:
Keep an eye out for price action unravelling currently. Price is pulling back to the 20 EMA, forming a consolidation, a flag of sorts.
A continuation candle near the average with decent volumes could be the sign of a fresh move upwards.
_____________________________________________________________________________________________________________________
Will be very grateful for a like and follow. :)
Trade active
GATI is showing strength today with decent volumes, but it has faced intraday rejection many times in the past from the 169 level, so it should close above it for the momentum to continue. If it is closing above 169, a position can be initiated keeping a stop loss just below 164, which is today's low. Target would be 180.
Keep watch. :)
Trade closed: stop reached
After making a high of 176 on 22.07.21, GATI turned back and has hit stop loss today.Note
GATI is trying to continue its upward move, will keep an eye open for possible re entry.
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