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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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Chart Patterns: After the Buy
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Bulkowski's Flags

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 12/14/2018
24,101 -496.87 -2.0%
9,514 -158.63 -1.6%
758 -1.70 -0.2%
6,911 -159.67 -2.3%
2,600 -50.59 -1.9%
YTD
-2.5%
-10.3%
4.8%
0.1%
-2.8%
Tom's Targets    Overview: 12/14/2018
25,000 or 23,500 by 01/01/2019
10,100 or 9,000 by 01/01/2019
740 or 775 by 01/01/2019
7,300 or 6,700 by 01/01/2019
2,700 or 2,525 by 01/01/2019

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 10/24/2018. I automated my cataloging of flags to make identification of the trend start and end repeatable, and used linear regression of the average of the high and low price within the flag to determine flag tilt (then reviewed trend start, end, and tilt and changed them as necessary).

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 335 to 349.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

$ $ $

Flags appear as small rectangles usually tilted against the prevailing price trend and mounted at the end of a flagpole. If you don't have a straight-line (or a quick move) price run (the flagpole), then you don't have a flag. The best performing flags have a long, near vertical flagpole.

 

Two flag chart patterns

Two Ideal Flag Patterns

Important Bull Market Results* for Flags

Overall performance rank for breakouts: Not applicable
Break even failure rate for up/down breakouts: Not applicable
Average rise/decline: 10%; 8%
Throwback/pullback rate: 53%; 60%
Percentage meeting price target for up/down breakouts: 45%; 45%

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

* The performance results for flags are based on the short-term price swing, not the change from the breakout to the ultimate high or low as in most other chart patterns.

Flag Identification Guidelines

CharacteristicDiscussion
Price trendCan be any direction leading to the chart pattern.
ShapeLooks like a small rectangle often tilted against the prevailing price trend.
Trend linesPrice moves between two parallel, or near parallel, trendlines.
3 weeksFlags are short, less than 3 weeks long. Patterns longer than that are rectangles or channels.
FlagpoleThe flagpole which leads to the flag should be unusually steep and last several days.
Volume trendDownward trend 74% (up breakouts) to 78% (down breakouts) of the time.
BreakoutUpward 60% of the time.
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Flag Trading Tips

Trading TacticExplanation
Measure ruleThere are 4 combinations of the measure rule computation. I show two on the right. The other two targets are just the start of the inbound trend (A). Compute the height from the start of the price swing (point A in the measure rule figure to the right) to the end of the price swing (B) and then multiply it by the above “percentage meeting price target.” Add it (upward breakouts) to the bottom of the flag (C) or subtract it (downward breakouts) from the top of the flag (C) to get the target (D).
Half staffSometimes, the flag will appear midway in the price trend. The half staff figure to the right shows an example, (move A equals B).
Flag tiltThe best performance comes when the inbound trend is upward leading to a flag which tilts downward. An example of that is the Half Staff picture on the right.
Flat baseIf the flag appears above (upward breakouts) or below (downward breakouts) a flat base then expect the move to be a large one.
Tight flagsA tight flag performs better than a loose one. A loose flag is one in which price meanders, pokes outside the trendline boundary, contains white space, or looks jagged. The tight v. loose figure to the right shows an example.
Yearly lowThe best performers occur when the breakout is within a third of the yearly low.
Throwbacks and pullbacksThrowbacks and pullbacks hurt post breakout performance.
Flag chart pattern measure rule
The Measure Rule
Flag half staff move
Half Staff
Flag tilt
Flag Tilt
Tight versus loose flag
Tight v. Loose
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Flag Example

Flag with flagpole chart pattern example

The above figure shows an example of a flag chart pattern. The price swing leading to the flag begins at A and ends at the top of the flagpole, B. A short flag sees price consolidate for a few days before breaking out upward and trending higher.

-- Thomas Bulkowski

See Also

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. Computers make very fast, very accurate mistakes.