![]() When the trendline resistance is broken, the stock enters the next leg of the trend move, and then the stock continues forward. It is a consolidation zone characterised by a counter-trend move that follows after a sharp price movement. Following the steep rise, candlesticks contained in a small parallelogram by forming a flag pattern. The pattern begins with a pole formation, which represents a nearly vertical and steep price move. ![]() It is a trend continuation pattern that gets its name from its visual resemblance to a flag on a flagpole. In an ideal world, the two shoulders would be the same height and width. Volume is typically highest during the first two declines, and then decreases through the right shoulder. Many traders look for a significant increase in volume to confirm the validity of the breakout. A move above the resistance, also known as the neckline, is interpreted as a signal for a sharp upward move. ![]() The shoulders are formed by the first and third troughs, while the head is formed by the second peak.
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