Bidu Bull Flag

Trading Momentum Bull flags : BIDU has been on a tear since beating earnings on 10/29. After such a grand move higher, it is healthy for stocks to digest this move by going sideways for a period of time before continuing to move higher. BIDU did just that for about two weeks before absolutely BEASTING through 203 resistance. One of the most important aspects of this trade is the relative volume on the day it is going through the resistance. If there is great volume, we expect there to be follow through in the trade, which tells us to hold most of our position for a greater move. We placed our stop at the low of the day of the area signified by the orange circle but have sold a portion of our position into strength on the way up.

As you can see there is an hourly Bull Flag forming in the range from $190 to around $200 area, around a $10 range. When the flag breaks, in most cases it should go the length of the flag, so a $10 range would equal to around a $10 break once it breaks out of the flag. After it broke out of $200 on strong volume it went as high as $211. We started this trade as a day trade buying 1200 shares at $198.50, giving it to $197.99 (the black line drawn under our entry). This trade was about $600 risk (1200 shares risking around $.50). We sold into strength over the next two days at $202, $205, $209 and the remaining at $210.

The main takeaways from this trade are

  • buying into bull flags
  • having a proper out
  • selling into strength

Do you have balls?

Find 3 charts that are currently forming momentum bull flags similar to this BIDU trade and post them in the Chart Reading Group chat with your complete game plan. 


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