Let's talk about flags first. I show two variations of a flag in the chart to the right, but there are others (most of them deal with the flag's direction of slope). Price moves in a straight-line run leading to the flag. If you don't have this straight-line run, then you don't have anything for the flag to tie itself to. In other words, a flag must have a flagpole. Without the flagpole, you just have a congestion area, not a flag.
A surprising number of people forget about the flagpole. The straighter and longer the flagpole, the better, I think, because it denotes strong upward momentum. Short flagpoles or ones that show price moving up, but also sideways, means the move after the breakout will likely be weak, too. I discovered that the velocity leading to the start of a chart pattern repeats after the breakout, regardless of the breakout direction. That doesn't always happen, but you can use it as a gauge of how long a trade might take.
Anyway, price begins the flagpole at A, rises to B in a wonderful straight-line run. Then price consolidates -- moves sideways -- creating the flag. In this example, price breaks out downward at C before beginning a new upward trend.
If you pay attention to the measure rule, the traditional approach is to measure the height of the flagpole (B-A) and add the height to the bottom of the flag (just above C) to give you a target price. Looking at the figure, I get 28.50-25.00 for a flagpole height of 3.50. Add 3.50 to 27 gives a target of 30.50, which the stock either hits or comes awfully close to.
Had to go down to form the flag.
A high, tight flag starts with a flagpole, or a nearly vertical ascent.
The high, tight flag is a bit like the holy grail.
This chart pattern gives a rare opportunity to reap huge profits in a short time.
slowly declining price after the flag pole is a very good sign of a breakout forming. just google high and tight flag pattern and look at the Images.