A bull flag is comparable to a bear flag, with the exception that the trend is upwards. An intense rally followed by a flag-shaped trend halt helps traders identify bullish flag formations. On the contrary, a bear flag pattern is created by a bearish or downward trend , which is followed by a lull in the consolidation zone or trend line.
While the trading could create a ‘W’, that may not always be the case. The top and bottom lines of the flag have a parallel downward trend until the stock sees a breakout to the upside.
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Now, the first thing you need to do is to spot a downtrend and wait for the price to break its trend Bull Flag Pattern line resistance. If you wait for a close above the highs, you reduce the chance of a false breakout.
Doji Candlestick Patterns
Bull and bear flags are just two types of flag patterns mirroring each https://www.bigshotrading.info/ other. The bull pattern is a key element of many trading strategies.
How do you identify a bull flag?
- Stock has made a strong move up on high relative volume, forming the pole.
- Stock consolidates near the top of the pole on lighter volume, forming the flag.
- Stock breaks out of consolidation pattern on high relative volume to continue the trend.
Then you want a tight consolidation where the price begins to move downward or countertrend on lower volume. Lastly, when the volume returns, you’ll buy the break of the previous candle’s high. Generally speaking, a bull flag pattern is very reliable depending on the context of the stock you are trading. The later the run and the more consolidations you have, the less likely a bull flag is to perform well. A bull flag also indicates that demand is stronger than supply. The “flag pole,” or initial uptrend, should be strong in demand. Once early bears realize the strength in the overall move, they give up their early shorting efforts.