High and Tight Flags Updated…

High and Tight Flag Identification Guidelines

High and Tight Flag Trading Tips

Trading Tactic Explanation Measure rule 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 take half of it. Add it to the bottom of the flag (C) to get the target (D). Breakout Only 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 patterns Trade 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. Slope Price 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. Trendline Flags with a down-sloping top trendline tend to outperform. Trendline Trade For 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.

The Measure Rule Tight v. Loose

High and Tight Flag 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

Other High and Tight Flag Examples

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions.
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