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Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.

As traders, we use technincal analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Anyalysis in simple terms is the study of historic price movements in a chart in search of patterns or consistantly traded support and resistance levels. Today we are looking at a specific chart pattern that falls under continuation patterns, the Bearish Flag Pattern.

Appearance:  A Bearish Flag pattern is comprised of:

  • A strong rise of bearish momentum with the volume rising and share price falling.
  • A break of the downtrend line and a sideways to bullish period where the share price starts to fall slightly, and the volume of trading decreases from the recent strong trend.
  • The breakout of the sideways to bullish movement and then a sharp fall once again. The volume should also accelerate after breaking out of the channel, or pennant.

Important Note: Be aware, this pattern could be the stock taking a breather or the direction is about to change to head Bullish. Wait to see the reverse to the downside and make sure the volume starts to increase.

Example: Tabcorp Holdings

Tabcorp has been in a bearish pattern for over three months now, with the fall creating the flag pattern starting early November. The share price started to fall to the $4.40 level, then having a slight bullish move higher, and after then breaking lower once reaching $4.55. The share price has slightly broken out of the bearish continuation, but as you can see from the below chart, TAH is sill looking bearish. The next level of support for TAH is at $4.24 – a level the share price has yet to close under in recent times.

 

There are many ways that you could take advantage of these patterns. As a specialist in derivatives, we are able to profit on a stock when it falls as well as when it rises.

If you would like to learn how to pick a stocks direction, then Join us at our live face to face one day “Technical Analysis, Picking the Direction of a Stock” course.

Contact us today on 03 8080 5788.

Regards,

Benjamin Farkas

TradersCircle