Looking at trading a possible bull flag on AUD/USD today in the 4-hour chart.
The bull flag pattern is a simple, easy-to-use strategy.
We can see that price had an impulsive move up which formed our flag pole. We had strong bullish volume to accompany this move which confirmed bullish pressure.
Currently, we are seeing a pullback between the bottom and top parts of the flag. Price is treating this area as support and resistance as we have had multiple taps on either side. To trade this setup as a flag, we need the following to happen.
We need the price to break up impulsively through the yellow zone and close above it with strong volume to accompany it.
If we see that, we can then wait for a retrace back into the yellow zone. Once price retraces back into that zone and retests it flipping it from resistance to support, we can then open up a long position targeting two possible areas above.
Target one would be around the 0,704 price level. Target two would be around the 0,7614 price level.
However, remember, we need all of our criteria and requirements to be met before we go ahead and jump into this position. We need a valid entry setup.
If the current price movement keeps trending lower and lower, it will invalidate our setup. We saw the same scenario on the Bitcoin (BTC/USD) Chart yesterday. The flag kept trending lower and broke the support and the setup was then completely invalidated which therefore gave us zero entries.
We need to keep an eye out to see if the same will happen here on the (AUD/USD) Chart.
Notice, to the left of this flag pattern, we see two bottoms. Could this be a Double bottom? Could the price be hanging around the neck zone before moving another leg up? Double Bottoms are famous for having price chop you out around the neck zones as market makers and institutions know that retail traders like you and I use these setups to our advantage so they will make sure to try and stop us out. This is just one possible bit of added confluence.
However, I'm not looking at this chart from the double bottom point of view. We are looking at it from a bull flag point of view. This suggests we need that impulsive move upwards for us to start thinking about an entry. Until then, let's watch what happens.