2. PRICE CURVES (DAILY OR WEEKLY)
The following diagrams illustrate the buy or sell signals by drawing the daily or weekly closing price curves.
2.1. Trend Lines
FLAGS / PENNANTS / WEDGES & RECTANGLES
Both flag or pennant patterns are preceded by either a sharp rise or fall in value of the scrip. These patterns tend to correct the technical overbought or oversold situations. Further the time taken for the formation of both patterns is less than three weeks and the time taken for the bearish patterns would be less than the time taken for the formation of bullish pattern.
These patterns are by far the most reliable continuation patterns and they very rarely act as reversal pattern. Hence, on the occurrence of these patterns, an analyst can trade along the trend with confidence. In a BULLISH FLAG the trend lines stop downwards and are parallel. In a BEARISH FLAG the tend lines stop upwards and are parallel.
Wedges are similar to flags where the trend lines are not parallel but slowly converge. Rectangles are similar to flags where the trend lines are parallel and horizontal. The following diagrams illustrate the buy or sell signals by drawing the flags / pennants
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