The pole of the pattern

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    What is the pole of a pattern?

    In technical analysistraders use various patterns to make sense of price data and identify possible trading opportunities.

    With flag and pennant patterns (both have a bullish and bearish version), one particular element of the pattern is known as ‘the pole of the pattern’.

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    The pole in flag patterns

    A flag pattern is a continuation pattern consisting of three main elements: a strong up or downtrend (the pole of the pattern), a consolidation phase (the rectangular flag shape itself) and then a continuation of the original trend.

    Bullish Flag

    1) Pole of the pattern (initial uptrend)
    2) Flag (consolidation phase)
    3) Continuation of the uptrend

    The chart above shows a bullish flag pattern with each element of the pattern labelled.

    The initial uptrend constitutes the pole of the pattern. This is followed by a period when the price pauses and retraces slightly, forming the gently downward-sloping rectangular shape (the flag). Finally the price breaks out and continues in the direction of the original trend; this can give you an opportunity to potentially enter at a better price than before the flag formed.

    The pole in pennant patterns

    A pennant pattern is also a continuation pattern that consists of three main elements: a strong up or downtrend (the pole of the pattern), the pennant shape (which is characterised by converging trendlines forming a triangular shape) and then a continuation of the original trend.

    Bullish pennant

    1) Pole of the pattern (initial uptrend)
    2) Pennant (consolidation phase)
    3) Continuation of the uptrend

    The chart above shows a bullish pennant pattern with each element of the pattern labelled.

    The initial uptrend constitutes the pole of the pattern. This is followed by a period when the price consolidates, moving sideways and gradually making lower highs and higher lows – this creates the triangular flag shape known as a pennant. Finally the price breaks out and gives you the opportunity to go long and profit from the continuation of the original uptrend.

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