Bullish Flag Pattern Analyze - Bottom Reversal

01

Pattern Overview

It is a YC trend inversion bullish pattern that tends to form at market bottoms after a downtrend and a consolidation range.

  • Initial Downtrend: The market exhibits a clear downward trend (Segment 1, Picture A).
  • Trading Range: A pause in the decline forms a trading range (Range, Picture A).
  • False Breakdown: The market appears to continue the downtrend with a break below the range (Down Break, Picture A).
  • Reversal: Immediately after the breakdown, the market reverses sharply, closing above the trading range upper boundary (Reversal, Picture A).
bottom-reversal-1
02

Formation

Wait for at least two valid bounces and a clean structure before planning entry.

  • Entry Point: Bullish trade entry is when the price closes above the upper limit of the trading range.
  • Velocity: The decline to the new low should be slower or equal to the speed of the rise back above the range.
03

Signal Confirmation

A bullish setup is confirmed after breakout and controlled retest near the key level. Place stop loss below invalidation.

  • A stop loss should be set below the lower boundary of the trading range or below the recent low.
  • Pattern failure is indicated if the price drops below the lower band of the range or the recent low.
bottom-reversal-2
04

Historical Performance

Historical cases show meaningful upside when confirmation and risk management are respected.

Some Examples

Anacor Pharmaceuticals

Anacor Pharmaceuticals