BULLISH FLAG PATTERN

A flag is a chart pattern formed during a counter-trend move after a sharp price movement. A bull flag pattern forms during an uptrend. It got its name because it resembles a flag on a flagpole while the price continues to move in an uptrend, attaining higher highs and higher lows.

              A bullish pattern is a continuation pattern that represents a temporary pause before the uptrend continues. An easy way to distinguish a flag shape in the price trend is to look for a rectangular pattern formed between two parallel trendlines. The stock, commodity, or currency futures price continues to move between the two trendlines in the opposite direction before breaking out and continuing in the uptrend.

                                                                

 

How to work?

1. The stock or Index should be potentially uptrend and then require retracement of at least 30-35% not more than 45-50%
If the stock takes a retrace of more than 50% then it is not considered a flag pattern, which means setup failed.

2. If the stock reverses after retracing 30-35%, we have to wait for a breakout or new high, and we have to plan for entry.

3. Look for the price to break higher with a length potentially equal to the size of the flag pole 

What should be the stop-loss & target in a bullish flag pattern?

        Trading a bullish flag pattern: Wait for the price to break out of the bullish flag pattern. The upper trend line is in the direction of the original uptrend. Place an order for the buy-side & stop loss should be at the level where the flag pattern lower trend line reaches its lowest point. For target Place your profit target the same distance above the level where the Flag's lower trend line ends.