A Flag (Bearish) indicate the continuation of a downtrend. We always see this pattern as consolidation when the price bounce between an upper an lower price limit. Flag is similar with pennant. In flag, the price trendlines tend to run pararell, but in pennants, the price trendlines tend to converge. After the consolidation, the price will continue downtrend, and it will create a reversal trend. This consolidation also reflect decreasing trading volume.
How to trade these patterns?
Always trade Flag and Pennants in the direction of the previous (main) trend. If the previous trend was down, wait for a break out to the downside and go short when the price falls below the lower support trend line. Place your stop above the upper resistance trend line.
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