Chart Pattern Analysis
figUre 13.36 Idealized Bull and Bear Flag Formations.gets may also be obtained based on the parallelogram itself. A two‐to‐one
parallelogram‐based price projection coinciding with a one‐to‐one pole‐
based price projection tends to result in the creation of a potentially strong
price barrier. Entries may be initiated at the breakout of the parallelograms.
See Figure 13.36.
In Figure 13.37, we see two bear flags meeting their minimum one‐to‐one
price objective. In addition we notice that price also reacted at the two‐to‐one
downside price projection based on the larger bear flag.
In Figure 13.38, we observe a bull flag meeting its minimum one‐to‐one price
objective based on the height of the entire formation from the parallelogram up-
side breakout level. We also notice the two‐to‐one price target based on the height
of the parallelogram being met at nearly the same price level on the 15‐min chart
of the EURUSD.bullish and bearish pennants
Bullish and bearish pennant formations also represent short‐term trend inter-
ruptions and as such are regarded as continuation formations. The pennant typi-
cally forms as a small symmetrical triangle. The pennant is preceded by a pole
which represents a short and rapid thrust in price, and is ideally accompanied
by heavy volume. The volume should gradually subside as the pennant devel-
ops and increase on breakout. Once volume tests its historical lows, a potential
breakout from the parallelogram may be imminent. The formation is complete
once the symmetrical triangle is formed and no breakout is required for pat-
tern completion. The minimum upside and downside price targets are simply