Here we have a valid pattern on FX:GBPJPY and now we are just waiting for a breakout to the downside. Flag patterns are also consolidation patterns, just like any other ( , bat, , , ). This pattern is usually formed after a strong movement in price action. There are 3 main parts to this pattern: the flag pole, flag portion, and the continuation portion. After a strong movement, a strong selloff in this case, the market starts to consolidate and we expect the market to breakout in the direction of the flag pole, in our case to the downside.
After getting the breakout, the target is equal to the length of the flag pole, which is 757 pips for this setup. Also a key point to keep in mind is that, the longer the market stays within the consolidation zone (flag portion), the stronger the breakout to the downside will be. The invalidation point for this is when we get a break AND close above the upper rising of the flag portion. Note that we are also getting divergence on the . See the chart above for more details.
NOTE #1: Before we reach our full target located at 177.696 level, we also have 2 very strong daily support levels in our way. So we do have the option to book partial profit at these 2 support levels and than we can leave the last position open till the full target is reached.
NOTE #2: The daily strong @ 187.027 should be taken into consideration for stop placement only AFTER getting the breakout in the to the downside.
Please feel free to AGREE or DISAGREE with this idea by leaving a comment below. Hit that thumbs up button (top left corner of this chart) if you like the idea. Thank you everyone for all the SUPPORT that you have given me so far, I truly appreciate it. Good luck everyone :)
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Importance of daily levels:
Validity of the daily levels in 2001 and 2002: