Flags + Fibonacci .382 and .786

Flag patterns are continuation patterns where price consolidates in a range after a strong move to the upside or downside.

Price is expected to continue in the same direction as the move prior to the consolidation.

For example, a bull flag is formed from a strong move to the upside followed by consolidation, so one could expect the price to continue higher after a flag pattern is formed.

Conversely, a bear flag is formed from a strong move to the downside followed by consolidation, so one could expect the price to continue lower after the flag pattern is formed.

A typical bull flag will consist of a big move up on large volume, followed by price slowly declining on low volume, before an increase in bullish volume and price to the upside.

A typical bear flag will consist of a big move down on large volume, followed by price slowly increasing on low volume, before an increase in bearish volume and price to the downside.

While flag patterns are common across all time frames and often play out as expected, you cannot blindly buy into the move and expect it to play out without identifying the complete pattern:

• The flag pole (top or bottom of the impulse move)
• The flag (consolidation of the range before breakout)

Many traders will often enter a trade too early or too late on these patterns, with a tight stop loss or none at all.

They either get stopped out or suffer huge losses.

Combining Fibonacci Retracement Tools within the pattern will help you identify entry points based on confluence.

These setups are not exclusively identified with Fibonacci levels.  However, this is an important reminder to never trade off a single pattern alone.

Always look for confluence.

Time Stamps

3:45 WAN Previous COTW (DO NOT TRADE THIS)

15:15 BULL / BEAR FLAGS AND POLES

• Bear flag: Price hits bottom on large sell volume and then you see volume declining as price slowly increases before the increase of a bear volume again
• Move down is 1 – 1 extension
• Daniel takes entry on the top of the bear flag
• Bull flag: Price hits the top on large bull volume and then you see volume declining as price slowly decreases before the increase of a bull volume again
• Move up is 1 – 1 extension
• Daniel takes entry on the bottom of the bull flag
• Consolidation is relatively short (approx. 20-30% of previous pole move)
• You can also market buy when it breaks out (on high volume)

38:49 IMPORTANCE OF .382 AND .786 

• For altcoins, we can look for .786 because they are more likely to retrace harder (.618-.786)
• For majors (BTC) .382 in a bull market

53:08 – TA and Q&A