GOLD_Positional_Bull_Flag_Pattern_Formation

Gold from the above chart is forming a Bull Flag Pattern Formation where it has rallied from the lower level of 680$ and tested the higher level of 1920 and on monthly closing basis was seen at 1825$. After the sharp rise from the lower level of 680 to 1825 Gold went in the consolidation phase where the consolidation was seen from August 2011 till now and is just near the lower support of 1500$ and if this support holds reversal is expected from current price and will move to test higher resistance level of 1790$ and crossover above 1790$ will give a Bull Flag pattern Breakout.

Calculating the Target from the Breakout which is also explained in the Chart where the market has rose from the lower level of 680 testing the higher level of 1825 making a Pole length of 1145$. Consolidation phase was seen between 1800$ to 1520$ which comes to 280 points. If we look at a reversal in price from here can test immediate resistance level of 1790$ and crossover above 1690 on weekly closing will further bring to higher target if 2935; which is the Difference of the Pole (1145) from the breakout point of 1790$.

1.        Sharp Move: To be considered a continuation pattern, there should be evidence of a prior trend. Flags and pennants require evidence of a sharp advance or decline on heavy volume. These moves usually occur on heavy volume and can contain gaps. This move usually represents the first leg of a significant advance or decline and the flag/pennant is merely a pause.

2.        Flagpole: The flagpole is the distance from the first resistance or support break to the high or low of the flag/pennant. The sharp advance (or decline) that forms the flagpole should break a trend line or resistance/support level. A line extending up from this break to the high of the flag/pennant forms the flagpole.

3.        Flag: A flag is a small rectangle pattern that slopes against the previous trend. If the previous move was up, then the flag would slope down. If the move was down, then the flag would slope up. Because flags are usually too short in duration to actually have reaction highs and lows, the price action just needs to be contained within two parallel trend lines.

4.        Break: For a bullish flag or pennant, a break above resistance signals that the previous advance has resumed. For a bearish flag or pennant, a break below support signals that the previous decline has resumed.

5.        Targets: The length of the flagpole can be applied to the resistance break or support break of the flag/pennant to estimate the advance or decline.