Bull and Bear Flag pattens are some of the most well known patterns by traders of all disciplines. Bull flags are created when there is a large spike in buying or selling of a security followed by consolidation in price action. The resulting candles look similar to a flag on a pole. Depending on the Bullish or Bearish sentiment the flag may be inverted. The pole being the candle representing the large spike in buying or selling and the flag representing the consolidation.
1. Horizontal Rectangle
The Horizontal rectangle flag forms when the consolidation has a more even mix of buying and selling back and forth. This price action will keep the price within the same recent range. The resulting pattern in the candlesticks will form a rectangle shape.
2. Pennant Flag
A pennant flag is formed when the candles that make up the consolidation trade within a tighter range the further it continues. The price action within the consolidation will continue to narrow forming a tighter range. This pattern resembles a symmetrical triangle.
What Bull & Bear Flags Tells Us?
These flag patterns tell us that the scales are tipped in either a bullish or bearish direction. The flag pole shows there is a large sentiment in one direction. The consolidation tells us there there are more who agree with this sentiment will continue. While traders who got in at the bottom of the pole are taking profits the new interest will keep the price within a tight range at the top or bottom of the pattern. The result is a breakout once the consolidation is outside of the recent range.
How to Swing Trade Bull Flags
Check out the infographic below with instruction on how to swing trade a bull flag using the daily chart as reference.
Bull and Bear Flags are great patterns to be on the lookout for. Although not fail-proof, they are proven strategies and have a great track record of working out as planned, and are very popular amongst traders.
These are tips on how to identify Bull and Bear Flag Patterns to add to your trading strategy. The better you understand the better you will become at identifying breakouts before they happen. You must know this if you want to take advantage of the price action movement! If you have any questions or comments about Bull or Bear Flags, feel free to use the contact form below to get in touch with us.