It’s hard to ignore all of these flag patterns developing around the market these days. They call them flags because the price pattern that develops after a move higher and then a sideways consolidation appears like a flag pole and flag. Usually these are continuation patterns that resolve themselves in the direction of the underlying trend. But we still need to keep an open mind.
Here are a two examples in Tech and Financials, but we’re seeing them all over in different sectors, sub sectors and major averages:
In some cases the patterns are more like pennants with converging trendlines instead of parallel lines like up above (Industrials and Discretionaries for example look like pennants). But regardless of a flag or pennant, both have similar ramifications. So if these indeed are continuation patterns, then we want to start to see the downtrend lines from the highs get taken out for confirmation. We’ve seen these patterns roll over in the past, like in Copper last September for example, so it’s important to always keep an open mind.
Interesting setups nonetheless…
Tags: $XLY $XLK $XLF $XLI $HG_F