The high tight flag pattern is one of the most bullish chart patterns that shows a strong trend followed by a trading range that could be setting up for another strong swing to the upside.
- It shows a chart is currently in a longer term uptrend.
- The high tight bull flag is a version of the standard bull flag that requires a much stronger trend and a tighter price base for the flag.
- It is a continuation pattern of the previous uptrend before the flag.
- Price should rise at least 90% or double in the 2 months or less before the flag price range forms.
- A consolidation price range pattern forms after the large uptrend. The price range can look like a flag or a pennant or just a pause and base in the rising price.
- Volume should decline as the price range in the flag forms.
- The ‘pole’ is represented by the previous uptrend in price before a price consolidation.
- The ‘flag’ is a rectangular descending price range after the uptrend to new higher prices stops. The flag has primarily lower highs and lower lows.
- The signal of the end of the flag pattern and the beginning of a new potential uptrend is when the descending upper trend line is broken with a move upwards in price.
- This pattern is thought to be the consolidation of the uptrend.
- Traditionally the move out of the flag is thought to be potentially as big in magnitude as the uptrend before the flag begins.
- The completed pattern is validated when price closes above the highest price in the pattern, which is almost always the peak of the flag.
- A breakout of the flag with higher than normal volume increases the chance of a continuation of the uptrend.
- A stop loss can be set at the lower trend line in the flag after entry.
- Of course this pattern does not work every time but when it does it can set up a huge win, but with all setups much of the edge comes from creating a good risk reward ratio through an initial stop loss to manage risk and a trailing stop to maximize a gain.