Looking at some nice flag pattern structures on GBPCHF and EURGBP. These charts I am showing you here at the 8 hour charts, but these flags are also visible from the 4 hour as well.
A flag pattern is when you see a clean counter-trend trend-line structure form against a recent strong move.
In the case above we have a bullish flag, as a bearish trend line forms again the recent strong bullish momentum. This creates the classic ‘flag’ shape.
The key is to look for a strong breakout candle that closes through the trend line and signals trend continuation. I call these dam wall setups, when the dam wall breaks (the trend line), the market usually explodes.
Here is a bearish flag setup on the EURGBP
This is just the same setup, inverted for a bearish scenario.
We’ve actually got some strong news coming out of the central banks for CHF and GBP, so these pairs should experience a volatility injection which most likely will fuel the breakout.
Let’s see what happens.
Joao seco
Lesson learned. Thanks all
Joao
Memito
Hello Dale, I have been long on EURGBP since the 6th of september 4h pin bar. My TP is on the top of the daily range, hope it is gonna go up to this level.
Replying to: Memito
Steve Epperson
Hi Memito. I know you want to hear from Dale, but he may be tied up. If I might add my two cents worth– I would encourage you to stay in at least until it prints another higher high on the weekly chart. The worst that could happen is it may reverse all of a sudden and print another higher low and break the bull trend line. I think it’s a low probability of that happening, considering the massive bull breakout we are witnessing right now. If it does reverse, you would still have a good bit of your profit left even if it did print that higher low. Dinner and drinks are on Memito!
Replying to: Memito
Dale WoodsAuthor
Maybe you can use this flag signal break as an early warning exit signal – if it happens that is.
Steve Epperson
EUR/GBP was fun to trade this week until Friday. I thought for sure it was forming a bear flag (I hate flags). I told this market specifically that it had to drop down and form another higher low– you know, cuz I said so. And besides, I was sick of it being in the middle of the channel. I desperately wanted that bear breakout. So as soon as that nice 4HR “rejection” candle closed, I hit market order (which you never ever do on a breakout entry). I kid you not, that thing blasted off upward so fast it made Niel Armstrong look like an amateur. My stop was obliterated. The next candle was worse. It looked like the Sears tower out in the middle of the desert! Moral of this long story: Enter 5 pips above or below signal candle. DUH! I knew this.
Replying to: Steve Epperson
Dale WoodsAuthor
Yeah don’t try to anticiapte breakouts before they happen. This was a flag pattern, needed a close through the flag to signal a short trade.
Joao Seco
Hello, have been following the same signal in EURGBP, except I am treating last Wednesday’s bearish rejection candle as my main signal and got in at retracement 0.85000 ( a bit to soon unfortunately) and have a stop loss at 0.85500. So I didn’t wait for a candle to close below trend line “the break of the dam wall”. I would appreciate to know what you guys think of that as you are employing a different approach, Many Thanks, Joao
Replying to: Joao Seco
Dale WoodsAuthor
I never trade these breakouts without a candle close, otherwise you risk getting caught up in fake outs.
Eric Lebouthillier
Dale , when breakout occured do you wait at close of the candle before entering or you enter on the fly when you see it cross with power ?
Replying to: Eric Lebouthillier
Dale WoodsAuthor
Yes I always wait for a candle close.
Henry
Nice