5 Sept 2008

Bear Flag in Our Backyard

Did anyone notice that we have a bear flag in our backyard ?

The attached chart shows that the flag pole of the bear flag pattern started to form sometime in 29 Oct 07; it was completed on 21 Nov 07. The length of the flag pole was about 515 points. The bear flag took the STI up 300 points from 3,300 on 21 Nov 07 to 3,600 on 11 Dec 07.

(click to enlarge for viewing)

According to the description of bear flag pattern, the target point shall be the length to the flag pole, measuring from the bottom of the flag. This target point is 2,790 which was exactly where STI had landed on 17 March 08. It rebounded to 3,200 for a total gain of about 400 points before heading south again. Since then, 2 wedges have been formed and both were broken.

By the look of the sharper fall being developed recently, STI may be going to create another bear flag pattern on its way.

Bear flag in Weekly Chart

To filter out the noises, it would be interesting to see how the chart will look like in a weekly chart.

(click to enlarge for viewing)

As shown, the weekly chart also forms interesting bear flag pattern except that the daily chart’s bear flag has now disappeared. What was shown is another bear flag pattern that had the pole top formed since 12 October 2007 @ 3,870. The bottom of the pole was completed on 20 March 2008 @ 2,825. The total length of the flag pole is about 1050. The flag took STI to a high of 3,250 on 9 May 2008.

Again, if the traders had their ways and the bear market shall continue for a few years, the target of STI could be 1,800, which is about 1050 (the length of the flag pole) away from the bottom of the flag pole.

Take note that 1,800 is a very strong support and it is also around 0.618 of the Fibonacci retracement level.

Other related sites
http://chart-patterns.netfirms.com/bearflag.htm

Disclaimer:
Information here is for sharing and learning. It is not intended to give any advice on price of any stock or movement or trend of any index. If a price or movment of a stock/index is given, it is only intended for illustration. The reader shall verify the information given here before using them.