Stocks & Commodities V. 24:5 (48-55): Bear Flags by Markos Katsanos

Stocks & Commodities V. 24:5 (48-55): Bear Flags by Markos Katsanos

Here’s how you can estimate price targets more accurately in a declining price trend and more.

My 2005 articles on flags included statistics for bullish flags only. Although my research started long before, the publication of the first article coincided with the worst market correction since 2003, and I have since received a number of emails from readers questioning the validity of the profit target formula as far as bearish formations are concerned.

This motivated me to research flags and pennants in a declining price trend. Results of the statistical analysis, together with a new formula for estimating a price target for the optimum exit strategy, will be derived later in this article. My research includes observations on 100 bear flag, pennant, or similar short-term consolidation patterns for the preceding year and a half from January 2004 up to June 2005. The criterion I used for including a pattern on the list was a steep and quick price decline leading to the formation.