The inverted flag pattern can be found in the above shown analysis, whereby the steep decrease in the movement of prices can be witnessed which signals a bearish movement in the prices of the stock. The period taken for analysis is from December 2016 to February 2017. The factors that can be taken into consideration for finding whether a pattern forms a flag shape are given below :
1. A steep pole which might denote a decrease or increase should be found.
2. Rectangular shaped sideways movement can be considered as flag.
3. It generally takes less time to form.
4. The positive/negative pole flag should give the appropriate breakout.
5. The volume is also expected to increase while giving the breakout.
Thus in line with the above factors, we can identify a bearish flag in the share price of the company ‘Divis Laboratories’ during the period December 2016 to February 2017. Since the market is witnessing a bearish movement in the prices of the stock, the position to be taken by the trader is short position. The trader is advised to sell the shares at the price that the stock is experiencing soon after the breakout.
