There are endless patterns that can be found when using technical analysis when reading stock charts. Most new traders want to be able to master them all, however we must focus on crushing the highest probability trades. We leave the hero traders to pick tops and bottoms, while we consistently profit from Bull and Bear Flags!
Here is an example of a bull flag, the stock has a nice run up (the flag pole), starts to consolidate in the (flag), buyers start to notice the consolidation and start to bid up the stock, once it breaks we look to profit first at the measured move of the flag, than at the measured move of the flag pole.
Now lets look at a real example in a stock we recommend recently :
You can see the run up or the flag pole forming from $218 to $228 or a $10 flag pole
You can also see the consolidation of the flag between $224 to $228 or a $4 flag
Our first target the shorter term target would be the length of the flag or $4 higher than $228, you can see when LMT broke out of its flag, the first day it reached that $4 higher target!
The bigger target of $238 will take longer to reach, maybe it never gets there, at least we have some profits locked in and know where we plan to profit!
We know our entry ($228), we know where to get out if the trade fails (below $224), we know where we plan on profiting ($232 and $238), now all we need to be is patient and stick to the plan!