As regular readers know, a “high tight flag” is an extremely rare, bullish chart pattern.
They typically form after an explosive move higher in a stock’s price.
Specifically, when looking for a high tight flag pattern, you need to see a stock climb 100% or more in less than eight weeks.
That’s one of the reasons this pattern is so rare…
It’s just not that common for a stock to double in such a short period of time. However, it does happen.
Sometimes it’s due to a news or earnings release, but sometimes there’s seemingly no new information at all.
Either way, such a move will almost always be accompanied by a large increase in volume, and you’ll see that the rapid increase on the price chart starts to resemble a flagpole.
Raising the Flag
Once the stock has exploded higher and the flagpole has been planted, so to speak, we want to see the flag develop.
Ideally, you want to see a pullback of no more than 25%. Some traders will use a 20% range, but I find 25% works better for me.
This is crucial…
The reason you want to see a limited pullback is that it signals that profit-taking is minimal and most buyers are holding their positions.
In other words, investors are expecting the stock to rise even further, so they’re holding on to the shares rather than taking profits on the big gain they already have.
If the stock can stay within that 25% range for two to six weeks, that consolidation will form the flag that sits atop the flagpole.
The Buy Signal
This brings us to the breakout phase of this price pattern.
Once the stock breaks out of the flag part of the consolidation pattern to new highs, that’s the buy signal.
In other words, you want to buy it as soon as the stock makes a new high.
To show you what I mean, here’s an example of a high tight flag I’ve been watching develop for a few weeks…
New Oriental Education & Technology Group Inc. (EDU) stock rose 124% in just three weeks at the beginning of the summer.
Since then, the largest pullback was within this high tight flag’s maximum range at 22%.
Price has also tightened nicely in recent weeks with a noticeable decrease in volume.
The stock then made a new closing high and cleared the buy trigger of $24 on Monday, closing the session at $24.23.
While this is not an official recommendation for Stock Surge Daily or part of our Watchlist, I will do my best to keep you updated on this trade idea so you can see how powerful this pattern really is.
You see, high tight flag breakouts can easily lead to big double- and triple-digit percentage moves for traders.
Sure, there is some risk involved in buying a stock that’s run so much higher in such a short amount of time.
However, the potential reward easily outweighs the risk if you’re using stop losses properly.
Don’t Miss My Most Anticipated Event Yet – “Operation: FIRE Trader”
Before I end today’s thoughts, I wanted to tell you about my breakthrough training event I’m putting together for this afternoon.
You see, while the country may seem in shambles at the moment…
There’s still a small group of traders who have consistently used a prophetic trading sequence to help them snatch gains of 941%… 1,379%… and 49,900% in both bull AND bear markets.
And since I’ve personally leveraged this same method to grow my own nest egg…
I’m officially shedding a light on this groundbreaking tool that’s infamously known for being “The #1 Best Performing Trading Strategy of All-Time…”
In fact, based on a 1,012 page white paper study done by expert analysts…
They found that out of 307 different occurrences this sequence occurred in the market… EVERY SINGLE TRADE rose in profit.
This is a HUGE deal…
Which is why, given the circumstances…
Having a dependable and precision accurate strategy in your arsenal is more important than ever.
I’ll be going live TODAY, July 26th, at 1 p.m. EST to reveal all the shocking details…
Plus, I’ll even show you how you could potentially bank $137k in just five trades.
Again, this is my most anticipated event I’ve ever put on at Traders Agency…
So, you’ll definitely want to make sure you’re there to see all of the evidence I share.
If you have more questions or comments, please send them to email@example.com.
Embrace the surge,
Editor, Stock Surge Daily