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Flags and channels look similar, but there are some key differences between the two patterns. First, flags are short-term patterns that typically extend 1-4 weeks. Channels are longer patterns that extend a month or more. Second, flags form after a sharp advance or decline. A bullish flag slopes down and forms after a sharp advance. A bearish flag slopes up and forms after a sharp decline. Channels are not dependent on the prior move. Third, flags represent a short correction or rest within the ongoing trend. Channels usually define the ongoing trend. The upper and lower trendlines mark support and resistance. The first chart shows SPY within a seven month channel. After the shart September advance, the ETF corrected with a falling flag and continued higher with the October breakout. SPY formed another falling flag after the sharp February surge and continued higher with the March breakout.
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The second chart shows the Gold ETF (GLD) with a potential channel developing over the last four months and a falling flag over the last four weeks. It looks like make-or-break time for GLD. A break above 110 would end the flag and signal a continuation of the February surge.
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Click this image for details
The second chart shows the Gold ETF (GLD) with a potential channel developing over the last four months and a falling flag over the last four weeks. It looks like make-or-break time for GLD. A break above 110 would end the flag and signal a continuation of the February surge.
Click this image for details
