Flags vs. Avalanches

Email Excerpt: "One thing that I find hard to determine is how to tell the difference between a bull flag and an avalanche, since both setup in a similar way. My way of judging those setups and to evaluate the next move is to look at divergence in certain indicators. I don't know if you have a better way to determine that. Thanks again for your comments..."

Response: There are a few things to watch for. First of all, the downside pace should be increasing while the upside pace descreases in an Avalanche as opposed to a Bull Flag. In a Bull Flag, the upside moves at least as the flag nears completion should be stronger than the downside moves, within the flag itself.

Additionally, a more extended trend and larger time frame or multiple resistance levels overhead will increase the odds of an Avalanche as opposed to a Bull Flag.

All my best,
Toni Hansen
http://www.tradingfrommainstreet.com/