Bull Flag Chart Patterns The Complete Guide for Traders

Whenever a strong gap happen, many bullish investors are known to exit their trades on profit-taking. Some bears also go in, hoping that the price will decline. When a bullish pennant forms, it usually sends a signal that the price will likely break out higher. Volume patterns may often be used in conjunction with flag patterns, with the aim of further validating these formations and their assumed outcomes. In an uptrend a bull flag will highlight a slow consolidation lower after an aggressive move higher. This suggests more buying enthusiasm on the move up than on the move down and alludes to the momentum as remaining positive for the security in question.

Volume during the consolidation period is diminishing as traders become uncertain of the direction of the market. The flagpole is the vertical distance between the highest peak and lowest trough. It is created by a sharp increase in price, followed by a period of consolidation.

What are Bull Flag and Bear Flag Patterns: All You Need to Know

The image below shows a bear flag occurring on an actual candlestick chart. You will note that the text appearing on the image points out the sharply declining flagpole.

Such patterns tend to form deeper pullbacks than the ones we reviewed here. This second bull flag pattern had a different form. It was a sharper pullback and is made up of fewer bars. Nonetheless, it also met our bull flag identification guidelines. A bearish flag is the exact opposite of a bullish flag. It usually happens when the price declines sharply and then form some consolidation.

The Bullish Flag Leans Against the Trend

To measure the Take-Profit target of the bull flag, you need to count the distance between the start of the trend and the correction. This distance should be counted from the breakout of the upper boundary of the bull flag.

Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. The breakout price level for the Bullish Flag pattern is the last point touching the top line . When trading, wait for the confirmation move, which is when the price rises above the Breakout level. A doji is a trading session where a security’s open and close prices are virtually equal. It can be used by investors to identify price patterns. A flag is a technical charting pattern that looks like a flag on a flagpole and suggests a continuation of the current trend.

What Is A Bull Flag Pattern and How to Use It

A Bearish Wedge, or Flag, consists of two converging trend lines. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted upwards at an angle. This is because prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows.

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• Different traders might identify the flag pole differently.
• Measure the distance between the start of the trend and the consolidation.
• You can also see how neatly the line connects to the other moves up that were rejected .
• The chart above shows the entire advance, as measured from the strong gap off the 50-day moving average (Aug. 11) up to the September high.
• Pennant patterns are rare, and if you happen to see one, you’ll notice it looks like a symmetrical triangle pattern, but one that can tilt either up, down, or sideways.

Only trade when the opportunity is right for your strategy. You could place https://www.bigshotrading.info/ a stop-loss at the most recent swing low as marked out by the dotted line.

Bull Flag vs Bullish Pennant

Price corrections are frequently framed by pennants, downtrend channels or sideways movement. The pennants in a triangle rising bull flag form represent converging trend lines, which happen when a trading range is formed with subsequent highs and lows.