Bullish Flag Pattern on Rio Tinto Limited (RIO)
Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
As traders, we use technical analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Analysis in simple terms is the study of historic price movements in a chart in search of patterns or consistently traded support and resistance levels. Today we are looking at a specific chart pattern that falls under continuation patterns, the Bullish Flag Pattern.
Appearance: A Bullish Flag pattern is comprised of:
- A strong rise of bullish momentum with the volume and share price rising.
- A break of the uptrend line and a sideways to bearish 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 bearish movement and then a sharp rise higher 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 Bearish. Wait to see the reverse to the upside and make sure the volume starts to increase.
Example: Rio Tinto Limited
Rio Tinto has today shown this pattern after a break in the midterm uptrend. With the share price falling in the last week and creating the ‘flag’ part of the pattern, the share price has since reversed the fall and started a rise today. With RIO now looking like it will continue higher, this pattern is looking like it will be further confirmed this week, and a move to 10-year highs may be seen in the short term. With their reporting also coming up on the 27th February, we may see the share price continue to rise in to the report.
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.
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