Trading bear flag setup
less frequently on the weekly charts (though the targets are larger) and especially the monthly charts. What does it look like? This is identified as a period of consolidation after the completion of prices initial decline. Keep in mind that you have a clear target once you establish your trade, and so you can easily cut that target in half to establish a clean 2 to 1 reward to risk ratio. The breakout forms when the upper resistance trend line breaks again as prices surge back towards the high of the formation and explodes through to trigger another breakout and uptrend move. Also, I have selected a few posts to get you started, which show examples on the daily chart and intraday charts: Ideal Bull Flag on 60-min Chart (DIA).
The pattern itself is divided into three parts. The sharper the spike on the flagpole, the more powerful the bull flag can. The chart below, Figure 7, shows a bullish pennant example and how it can be traded.
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Follow me on Twitter at @WEnglandFX. However, some traders may wish to give it more room to avoid wiggles and place their stop at or under the lower trendline on uptrends and lower trendline on downtrends. Once the stock peaks out, the bears regain some confidence as they add to their short positions only to get trapped again when the breakout forms causing more short covering. Your stop could be placed where you are comfortable beneath.00. If you are more conservative, you can actually wait for the price to break out of the upper channel and enter at that point. The next chart below, Figure 4 shows an example of how the bearish flag is traded. Flag patterns start off violently as the other side gets caught off guard on the trend move or as bulls/bears become overambitious. To offset some of the risk, lighter shares can be used when trailing the second trendline stop-loss. Upon break out from this pennant, price then subsequently rallied to reach the projected target. It is the second component that creates the trade.