Here we have a valid pattern on FX:AUDJPY and currently we are sitting close to the potential breakout to the downside. Flag patterns are also consolidation patterns, just like any other ( , bat, , , ). This pattern is usually formed after a strong movement in price action . There are 3 main parts to this pattern: the flag pole, flag portion, and the continuation portion. After a strong movement, a strong selloff in this case, the market starts to consolidate and we expect the market to breakout in the direction of the flag pole, in our case to the downside.
After getting the breakout, the target is equal to the length of the flag pole, which is 252 pips for this setup. Also a key point to keep in mind is that, the longer the market stays within the consolidation zone (flag portion), the stronger the breakout to the downside will be. The invalidation point for this is when we get a break AND close above the upper rising of the flag portion. See the chart above for more details.
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