Flag Alerts!

//Flag Alerts!

It’s almost Veterans’ Day, and flags will be fluttering in the breeze throughout these United States.

Mr. Market is preparing for Veterans’ Day as well by creating an unusual proliferation of Bull Flag patterns, signifying the resumption of the uptrend after a pullback.

After a strong trending move as we have had over the past several weeks, prices frequently pause to take a breath.  Prices consolidate as traders gather their forces for the next assault up or down.  During this process the price charts often generate a brisk pullback move against the prevailing trend direction that shakes out the weak trend followers.  Such a pullback move often resembles the rectangular shape of a drooping flag.  In an uptrend, the previous upward thrust line would represent the flagpole, while the subsequent pullback swing would be the flag.  This is called a bull flag.  In a downtrend, a downward thrust line would represent the flagpole, while the subsequent upward pullback would be the flag.  This is called a bear flag.

Once you have identified a flag pattern on your chart, a breakout through the top of the flag on high volume signals a continuation of the uptrend.  You can project a price target for the trend continuation move after a flag pattern by measuring the length of the flagpole.  In a bull flag pattern, if you add that length to the bottom right corner of the flag you can usually predict the price range where the next price swing is likely to end and you can use that as a profit target to exit your position.

Below are examples of several flag patterns on current charts, as identified by the Arps Flag Patterns tools for charting and RadarScreen® The flag patterns are shown in white, with a white dot showing the breakout point and a series of white dots starting on the bar where the breakout occurred which show the upside price target for that pattern.

TSO – Breakout 26.79,  Target 32.56

ITW – Breakout: 49.72, Target 56.84

OXY – Breakout 94.52, Target 119.34

Other Bull Flag signals include:

Symbol Breakout Price Target Price
TYC 45.25 50.08
LXK 33.14 37.70
GPS 19.68 22.25
MCP 40.66 47.77
HAL 37.44 43.24
GLD 170.29 179.71

 

 

 

 

 

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T08:18:31+00:00November 8th, 2011|Hawk's Picks|