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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Earnings Flag

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/27/2017
20,981 6.24 0.0%
9,194 26.25 0.3%
708 2.41 0.3%
6,049 23.71 0.4%
2,389 1.32 0.1%
YTD
6.2%
1.7%
7.3%
12.4%
6.7%
Tom's Targets    Overview: 04/17/2017
20,100 or 21,150 by 05/01/2017
8,500 or 9,500 by 05/01/2017
725 or 685 by 05/01/2017
6,150 or 5,900 by 05/15/2017
2,275 or 2,425 by 05/01/2017
Mutt Winners: None YTD

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 893 to 907.

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The earnings flag is an event pattern that occurs after a company announces earnings. Price makes a large upward move, consolidates, and then resumes the uptrend. An earnings flag is the best performing event pattern. Discovered by Thomas Bulkowski in the late 1990s.

An earnings flag appears

The Ideal Earnings Flag

Important Bull Market Results for the Earnings Flag

Overall performance rank for upward breakouts (1 is best): 1 out of 6
Break even failure rate for upward breakouts: 10%
Average rise: 34%
Throwback rate: 63%
Percentage meeting price target for up breakouts: 86%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Earnings Flag Identification Guidelines

CharacteristicDiscussion
TrendPerforms best in an upward price trend.
Earnings announcedWhen the company announces earnings, the stock makes a large move up or price gaps upward the next day if the market happens to be closed.
FlagpoleLook for a near vertical price run, preferably lasting several days.
FlagNear the top of the flagpole, price consolidates and usually trends downward. The appearance can be a flag, pennant, or an oddball shape. The best performers are tight congestion patterns, not loose price structures with the stock meandering up and down.
BreakoutA breakout occurs when price pierces a flag or pennant trendline or closes above the high in the pattern (including the flagpole). Don't trade unless you get an upward breakout.
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Earnings Flag Trading Tips

Trading TacticExplanation
Measure ruleThe figure to the right shows the measure rule. Compute the height from the highest high in the pattern (A) to the announcement day low (B) and then multiply it by the above “percentage meeting price target.” Add the result to the flag low (the lowest low to the right of the flagpole, C) for a price target.
ConfirmationBuy when price pierces a flag or pennant trendline (D in the figure to the right) or rises above the event pattern's high (A), but not before.
Yearly lowThe best performers occur in a price uptrend but they are within a third of the yearly low.
Sell signalIf price shows weakness in the first week, consider selling. Be prepared to take profits quickly.
Earnings flag event pattern measure rule
The Measure Rule
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Earnings Flag Example

Earnings flag event pattern example

The above figure shows an example of an earnings flag event pattern. This one appears as a pennant (outlined in red), a small price pattern bounded by two converging trendlines. Earnings were announced and price jumped at the market open (point A) and then the pennant formed. When price pierced the pennant at B, that was the buy signal.

Trying to make money from this pattern would be difficult. Entry would be easy for a quick trader, but deciding when to exit would be the problem.

The second pennant in March makes things easier when price stages an upward breakout. Price throws back to the pennant base but keeps going down. A perfect trade in this example would earn about three points.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Sad case: two dozen empties.