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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
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
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Visual Guide to Chart Patterns book.
Encyclopedia of Candlestick Charts book.
Encyclopedia of Chart Patterns 2nd Edition book.
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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 07/22/2016
18,571 53.62 0.3%
7,966 107.39 1.4%
720 9.93 1.4%
5,100 26.26 0.5%
2,175 9.86 0.5%
YTD
6.6%
6.1%
24.7%
1.9%
6.4%
Tom's Targets    Overview: 07/14/2016
17,800 or 18,600 by 08/01/2016
8,350 or 7,600 by 08/01/2016
685 or 725 by 08/01/2016
5,100 or 4,750 by 08/01/2016
2,200 or 2,070 by 08/01/2016

Written by and copyright © 2005-2016 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 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 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: 4%; 2%
Average rise/decline: 23%; 16%
Throwback/pullback rate: 43%; 46%
Percentage meeting price target for up/down breakouts: 64%; 47%

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 linesPrices move 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 71% of the time.
BreakoutUpward 54% of the time.
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Flag Trading Tips

Trading TacticExplanation
Measure ruleCompute 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 staffThe average move from the trend start to the top of the flag is 22% in 15 days. The move from the flag low to the trend end is 23% and takes 19 days. The half staff figure to the right shows an example, with the flag midway through the trend (move A equals B).
Flag tiltPerformance suffers when the flag slopes in the direction of the prevailing price trend. The flag tilt figure to the right shows an example of price tilting upward in a rising price trend.
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 middleUpward breakouts perform best within a third of the yearly high. Downward breakouts do best 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

-- Thomas Bulkowski

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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 shows for a few days and then an upward breakout takes price higher.

See Also

Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Computers make very fast, very accurate mistakes.