Modern technology has made the stock market more accessible than any other time in the financial history of the world yet traders still struggle to find worthy investments to trade. Despite having access to advanced charting packages, real-time news, and instant access to a company’s financial performance, finding worthy stocks to trade continues to be as much of a challenge in the 21st century as it was in the past centuries.
Explanations as to why this is so difficult are as numerous as the challenges that they attempt to explain away. Like the Hydra, you chop off one head only to have another head grow back to take its place, and you’re left with more unanswered questions leading to frustration and overwhelm.
When I was a kid, my dad told me this story about some young lumberjack wandered into a logging camp inquiring about a job. He got hired on and pretty soon he worked his way up to being one of the top lumberjacks in his camp. He got so good, that lumberjacks used to bet him money over who could chop down the most trees in a given day. He took every challenge and won.
Over time, news spread to the surrounding camps and new challengers came calling. He took every challenge and, again, won every challenge by cutting down more trees than any other lumberjack in the surrounding area.
With no one left to challenge him, he settled into life in the logging camp.
One day, an old man came looking for him and challenged him.
The big, burly young lumberjack laughed and said he didn’t have a chance and to go back home before he got hurt.
The old man pulled out a wad of money and reissued his challenge and bet him dollar for dollar that he could chop down more trees than him during a day’s work.
Price patterns are nothing new when it comes to trading in the market but some traders rely on price patterns as their core method in trading stocks. A price pattern appears after a stock’s price enters a period of price contraction and begins trading between high and low prices over a period of time. When analyzing these charts, experts look for certain patterns to form that indicate it might be a good time to buy or sell a certain security when the pattern breaks. For trading price trends, one type of pattern that yields reliable results is a continuation pattern such as the bull flag continuation pattern.
A bull flag pattern on a stock analysis chart forms when there is an active upward trend in a security; this is then followed by a period of slightly downward activity (called a pause, because it is the security markets natural attempt at correction that is often seen with an active upward or downward trend), and this is often in turn followed by the resumption of the same active upward price trend.
In order to be a true continuation pattern, it is first required to see the establishment of a prior trend. In the case of a bull flag pattern this is always in the upward direction. There will also be evidence of a sharp move or advance often based on a heavy volume of trading for the security (sometimes it can contain small gaps also). This will be the first of two advances in a typical bull flag pattern; the second one will come after the flag pattern emerges.