The Anatomy of an Elite Swing Trading Setup
Over the past few months we have been talking about the bull flag or “high tight flag” pattern as one of the best chart patterns and technical swing trading setups in 2018.
This powerful technical pattern, a real bull flag, is explained more under ‘Top Chart Patterns’ on the main site.
Last week, subscribers to the daily alert were treated to EGAN in a very well-formed bull flag pattern on a stock with rapidly improving fundamentals and a catalyst.
This is a great example of an elite swing trading setup and understanding why this worked can be a real game-changer for most traders.
EGAN was a terrific setup because of its strong, long-term uptrend that raged on for over a year. Unlike most pump and dump stocks under $10, this stock was able to maintain its higher levels and uptrend as can be seen on the chart below.
EGAN then had a narrow, more horizontal, uniform pullback and then broke the downtrend resistance in the flag or pennant portion of the pattern just before we featured it. This occurred right before the decision of which new stocks to include in the Russell indices.
The morning after we featured it, the announcement was made to include EGAN in the indices. EGAN then reached our $13.07 target entry point, consolidated for about a half hour at around $13.25 and then took off.
The price went from $13 to $17 in a week. It was an easy trade to take part in whether you work full time or not.
This is probably the most bullish swing trading setup in the market. A large, tall bull flag pattern within a long-term uptrend. A narrow, more horizontal consolidation for a long enough period of time to prove its not a pump and dump. Then a break of a downtrend resistance in the flag or pennant portion of the pattern just before a potential catalyst.
EGAN soared 30% higher in 5 trading days. These are the kinds of moves we are seeing this year out of top bull flag patterns.
EGAN broke out of its first high, tight flag late in 2017 before a more than 400% move higher. One of the few low priced stocks at the time to break out of this pattern and make a good move.
When a stock can form this pattern over $10, the chances of a big move within a couple weeks are actually much higher than in the lower price ranges. In our back-testing, the success rate was around 90% as long as the price was over $9 and met all the requirements in our high, tight flag course.
On the day of the breakout we want to see enormous volume – much more volume than what took the price into the flag portion of the bull flag pattern. This sets up a very good secondary setup which is a break of the prior days high the next day. Both are excellent swing or day trades if all the factors above are in place.
A favorite adage among traders is “trade the best and forget the rest”. This is a great way to do it by choosing only the best bull flag patterns to trade.
A strong bull flag pattern on a stock with rapidly improving fundamentals within a strong long-term uptrend with a breakout in heavy volume on a strong catalyst. Its an elite swing trading setup that we are always on the hunt for during a market uptrend.
Generally you see more bull flags during the fall and winter months and many experts are calling for a sizable market rally later this year.
If they are right, it should be a bull flag bonanza in the weeks and months ahead. Many of the best patterns should break out ahead of it just like EGAN did last week.