Context. Ask in what sort of context was the bull flag formed? Broad bull channel? Tight steep bull channel? Gaps within the channel etc...price staying above previous BO point (i.e. gaps between what appears to be bottom of the flag and previous BO points. That sort of stuff. Then I look at the bars in the flag itself. That is I look at the bullish..bearish pressures in the flag itself. Next, I observe where the flag is happening in relation to a 21 period EMA and a 50 period SMA. As I correlate the bars in the flag with the general context that preceeded the flag and with the MA’s I will make a decision. Where is the larger probability? A continuation or a reversal?
For instance, in a tight steep bull channel with bullish behaviour as the senario I would see a flag simply as a PB and be willing to scale in on practically any bar within the flag. Especially, if price is staying above both MA’s. I would be willing to scale in near the top of the flag or near the bottom. It doesn’t matter. The context favors a continuation of bullish behaviour and not a reversal. Now if the flag takes place on a broad, slightly sloped channel...well...that is a horse of a different color. In such a case I would use different tactics.
Remember, bulls and bears are always pushing. In a bull flag, bulls want a continuation. Bears a reversal. Who is winning? What does the context say? Who is likely to win the push and shove within the flag itself?
For instance, in a tight steep bull channel with bullish behaviour as the senario I would see a flag simply as a PB and be willing to scale in on practically any bar within the flag. Especially, if price is staying above both MA’s. I would be willing to scale in near the top of the flag or near the bottom. It doesn’t matter. The context favors a continuation of bullish behaviour and not a reversal. Now if the flag takes place on a broad, slightly sloped channel...well...that is a horse of a different color. In such a case I would use different tactics.
Remember, bulls and bears are always pushing. In a bull flag, bulls want a continuation. Bears a reversal. Who is winning? What does the context say? Who is likely to win the push and shove within the flag itself?