A continuation pattern formed when there is a large movement in price, the flagpole, followed by a consolidation period with converging trendlines, the pennant, followed by a breakout movement in the same direction as the initial large movement, the second half of the flagpole. Pennants, which are similar to flags in terms of structure, have converging trendlines. A clear breakout confirmation is needed to trade these patterns as the price continues in the same direction prior to the pennant formation.
Trade: Wait for confirmation of breakout with a long range bar.
Target: A typical target is from 76% to 100% of the AB range prior to the "Bear flag". The secondary targets are from 138% to 162% of the range AB.
Stop: Place a "stop" order above C to protect the "short" trade.
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