In today’s piece, I will show you three of the best trading occasions on the market right now, where you will see the power of the flag, i.e. a technical trend correction pattern.
First up is DAX; the most popular index in Europe. DAX already used the flag last week (blue). Back then, the formation helped this index to recover after a strong bearish breakout of the horizontal support at 11,800 points (yellow). This week also brings us a flag, but a much smaller one (green). As we mentioned, this is a trend continuation pattern, so it promotes a further upswing.
Next instrument is the AUDUSD, where a flag was present in the second half of May and beginning of June. As expected, price broke its lower line. That movement was initiated by the double top formation. Gladly, we warned our traders about such a possibility in one of our earlier reports. Long-term sentiment is very negative.
USDJPY is the last instrument. Here, the price remains in a flag formation, in which it has been for the past two weeks. This pattern promotes a breakout to the downside. Negative sentiment is strengthened by the fact that we are close to the mid-term downwards trend line, which could act as a resistance. Shooting star on the daily chart could also be handy for sellers. The only thing which is stopping us from going full bear here is the major, long-term upwards trend line.