Forex technical pattern analysis: sharp flag pattern
Bearish sharp flag
Like the rectangular pattern, the sharp flag is a continuous pattern formed after a strong trend.
After experiencing a large ups and downs, buyers or sellers usually take a breather before pushing the exchange rate further in the previous direction. In view of this, the exchange rate usually undergoes a short period of consolidation and forms a small symmetrical triangle, which we call a sharp flag.
When prices are still in the process of consolidation, more buyers or sellers usually usually intend to enter a strong trend, which in turn prompts the exchange rate to break through the sharp flag.
The sharp flag was formed in a market that fell almost straight. After the exchange rate experienced a sharp decline, some shorts chose to close their positions, while others planned to join the current short-selling team, which caused the exchange rate to fall into a short period of consolidation.
As long as there are enough short positions to enter the market, it is a matter of time before the exchange rate falls below the sharp flag bottom and moves further lower.
As you can see, after the exchange rate fell below the bottom of the pattern, the previous decline was announced to restart. How should we trade this pattern? Our suggestion is to place a short order below the bottom of the sharp flag and stop loss above the flag. The advantage of this setting is that if the downward breakthrough is a false breakthrough, we will leave the market at the first time.
The technical patterns we have dealt with before, the volatility after the breakthrough is almost the same as the height of the pattern. However, the sharp flag pattern is different from the above pattern. The sharp flag pattern has a greater increase or decrease after the breakthrough. Usually, we use the previous operating range (that is, the flagpole we are familiar with) to measure the target level of the exchange rate after a breakthrough trend.
Bullish sharp flag
A bullish sharp flag, as its name suggests, it means that the rally is about to start again. This means that after a short period of consolidation, when the market has accumulated enough bulls, the price will restart to rise rapidly.
In this example, the exchange rate experienced an almost vertical upward movement after a short break. We can hear the cheers of the bulls, have you heard?
As we expected, after the pattern breakthrough, the exchange rate appeared a new round of strong upside. We can place multiple orders above the sharp flag and set a stop loss below the flag to prevent false breakouts.
As we have discussed before, the rise after a sharp-pointed flag breakthrough is approximately the height of the previous flagpole, or the earlier rise. Although the shape of the sharp flag is not large, they can send out large price fluctuation signals in advance, so don’t underestimate the role of the sharp flag!