, 6 tweets, 2 min read Read on Twitter
[1] Flags and pennants are continuation patterns which have relatively small risks and quick profits. A bullish flag is when the price is rising sharply and then moves sideways in a straight line to form a flag or in a downward triangle to form a pennant.
[2] The idea is that the momentum from the prior uptrend continues after the flag/pennant has broken its resistance. This prior uptrend forms the pole of the flag and is typically vertical.
[3] The high price which reduces the demand and creates fluctuations within support and resistance lines. Once the prices this resistance and moves upward (same as prior trend), it creates an opportunity for buyers to buy high and sell higher.
[4] During the uptrend of the security before the flag formation, the volume of the security increases with the sharp increase in price. The volume also increases when the flag formation is finishing and the security picks up and starts rising.
[5] The buyers at the peak of the flag pole are unable to bid more, the sellers wish to lock their profits, prices hence start falling. The fall is gradual as some buyers still want to purchase the stock as they foresee its growth.
[6] False breakouts creates the biggest issue in this charting analysis. The investors are unable to find when the price is actually picking up momentum. One way to solve this is to use the moving averages chart(MAC). We should buy when price comes very close to MAC. #Flags
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