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Bulkowski's High and Tight Flags

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As of 02/19/2019
  Industrials: 25,891 +8.07 +0.0%
  Transports: 10,618 +49.99 +0.5%
  Utilities: 743 +4.68 +0.6%
  Nasdaq: 7,487 +14.36 +0.2%
  S&P 500: 2,780 +4.16 +0.1%
YTD
+11.0%
+15.8%
+4.2%
+12.8%
+10.9%
Tom's Targets    Overview: 02/14/2019
26,000 or 24,600 by 03/01/2019
10,900 or 9,900 by 03/01/2019
755 or 725 by 03/01/2019
7,700 or 7,050 by 03/01/2019
2,825 or 2,650 by 03/01/2019

Written by and copyright © 2005-2019 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 10/30/2018.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 350 to 361.

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A high and tight flag
High and Tight Flag

 

Important Bull Market Results for High and Tight Flags

Overall performance rank (1 is best): Not available
Break even failure rate: 15%
Average rise: 39%
Throwback rate: 68%
Percentage meeting price target: *53%

* Uses a half-height target.

The above numbers are based on 1,009 of perfect trades. See the glossary for definitions.

High and Tight Flag Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the flag. Price must rise at least 90% (shoot for a double) in 2 months or less.
ShapeA consolidation pattern forms after price doubles. It usually doesn't look like a flag or pennant, just a pause in the price rise.
VolumeRecedes for best performance
ConfirmationThe pattern confirms as valid when price closes above the highest peak in the pattern, which is usually the flagpole top.
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High and Tight 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 take half of it. Add it to the bottom of the flag (C) to get the target (D).
BreakoutOnly buy when price closes above the highest peak in the chart pattern (including the flagpole). That is point B in the Measure Rule figure to the right. Buying sooner risks price never confirming the pattern (in other words, price drops or moves horizontally for months). And yes, I know this is different than what I wrote in my book. HTFs fail too often when using a flag trendline break. Instead, place a buy stop above the highest high in the chart pattern.
Tight patternsTrade tight flags, not loose ones. Tight flags perform better than loose ones. A loose flag is one in which price meanders, pokes outside the trendline boundary, contains white space, or looks jagged. See the figure to the right.
SlopePrice trends of 45 degrees or so in the flagpole mean a better post breakout rise than ones that go nearly vertical leading to the flag.
TrendlineFlags with a down-sloping top trendline tend to outperform.
Trendline TradeFor steep price trends, use a volatility stop and draw a trendline beneath price. If price closes below the trendline, then consider selling. For an example, look at IIIN from January to April 2006. The HTF starts in January and price more than doubles in less than 2 months, eventually rounding over at the top.
High and tight flag chart pattern measure rule
The Measure Rule

Tight versus loose flag

Tight v. Loose

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High and Tight Flag Example

High and tight flag chart pattern example

The above figure shows an example of a high and tight flag chart pattern. Price begins the rise in October at 9.36 and rises to 17.80, a climb of 90% in less than 2 months. Then price moves sideways, forming an ascending triangle. When the breakout occurs, it confirms the high and tight flag chart pattern as a valid one and price resumes the up trend. Price tops out at 23.72 less than 2 months later, a rise of 33%.

-- Thomas Bulkowski

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Other High and Tight Flag Examples

See Also

Written by and copyright © 2005-2019 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. 24 hours in a day; 24 beers in a case. Coincidence?