What is a bear pole and flag pattern? How to trade them?
Pole and Flag Pattern resembles the formation of a flag with a big pole. This pattern can be formed in both upward and downward directions. When it is formed in a downward direction, it is called a bear flag, and when it is formed in a upward direction, it is called a bull flag. Let us see from the live chart of stock how does this pattern look like and what are the predictions for the price can be made out of this chart.
In the above chart of HeroMotoCorp Ltd., there is a beautiful bear flag pattern formation and the flag is almost at the verge of breaking down. There are two components of a flag pattern.
- Length of the Pole
- Length of the Flag
Length of the pole is shown by the Blue colored pole line of the flag which is of around 760 points. Length of the flag is shown by the black line between the two red and green lines of around 305 points. Usually whenever a pole and flag pattern is formed, it is predicted that the after breaking down a bear flag, the price can move down further equal to the length of the flag or the length of the pole according to the broader market conditions. Here also, the price is at the verge of the breaking down the flag and if the breakdown is successful and the price closes down below the flag red line on a daily basis, then the stock can move as per the blue arrow path indicated and can move down to a price of 2600 per share.