One of the most commong chart patterns is the flag and it can be a bullish or a bearish depending on the direction it is formed. Usually they are trend - confirming patterns and are occuring after a strong impulse of buying or selling activity, some brief consolidation, and then the price continues in the same direction as the first impulse. The target of the pattern is the "handle" of the flag, meassured from the moment of breach. Sometimes the buying can continue agressively and the price may reach higher than the initial target zone. Traders though interpret differently the target level in regards to the meassurement of the handle. The stop loss is usually placed below the configuration itself, not the handle. That of course can be adjussted by everyone's personal view and risk management. The decision to enter may vary. The first entry can be aggressive with a sell or buy limit near the pattern. Order can be executed after the breach and on the next open, or you can wait out for a correction back to the figure. We say that the flag is complete and confirmed when the initial target level is reached.
In the example we see current development of a bullish flag in Spotify. The breach here was minimal and not that convicning, but the next open was strong and with a gap. Yesterday's close is a classic correction of the initial impulse of 40% to 50% of the candle.
In the example we see current development of a bullish flag in Spotify. The breach here was minimal and not that convicning, but the next open was strong and with a gap. Yesterday's close is a classic correction of the initial impulse of 40% to 50% of the candle.