Above is a chart of a stock we have spoken about and what we want to show you in the chart is one of our favorite chart patterns. Bull Flags are our bread and butter and a staple in any traders tool belt, most new traders want to reinvent the wheel and trade patterns they have yet to understand. For now your primary focus is to master this set up.
The bull flag is a continuation pattern which only slightly retraces the advance preceding it. The technical buy point is when price penetrates the upper trend line of the flag area, ideally on volume expansion. Context: Found within an uptrend. So as we can see here $200 is an area this stock had trouble breaking on the way up. Once it consolidates a bit, by moving sideways, it finally breaks higher on noticeably expanded volume. That's when we want to be in the trade, with our stop at the low of the day on the day it breaks.
Why the low of the day on the day it breaks? This is a bullish chart pattern, if the stock just broke out of a flag but ends the days at lows, that's a really bad sign and the trade is going to fail 9 times out of 10. This flag has a $10 range before it broke, so most traders buying this pattern would look to sell $10 higher from the break.
If the flag break is $200, where will most traders look to enter their position?
If you buy a stock when it breaks out of a bull flag, but ends the day at lows what should you do?
If the stock breaks out of a bull flag and ends the days at highs what should you do?
Find 3 stocks that are currently forming bull flags and post them in the Game Planning Chat along with your answers to the 3 questions above.