Bull/Bear Flag Pattern

Components of a Flag Pattern A flag pattern has three components: The flag pole The flag The continuation The Flag Pole This is the initial move in price. It can be represented by either an uptrend or a downtrend. The angle of this move is irrelevant in terms of the validity of the flag pattern. The distance of the move should be measured by calculating the previous swing high or low to the current swing high or low. As an example, we would measure from the bottom of the red line to the top of the red line in the illustration above. The Flag The flag formation is the key to this pattern. This is the point at which, after a strong move in price, the market consolidates for a period of time. The length of time is irrelevant, however do note that longer consolidation periods tend to lead to more aggressive breakouts. The Continuation At this point the market has finished consolidating and is now trending in the original direction. Using the distance we calculated above for the flag pole, we now have a measured objective for a possible target.

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