What Is The High Tight Flag Chart Pattern?

TraderLion

January 10, 2020

4 min read

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What is the High Tight Flag Pattern?

The high tight flag chart pattern is an extremely rare, bullish formation. Stocks that have amazing CANSLIM fundamentals generally form these. The high tight flag is created when the stock has a very sharp move higher followed by a brief consolidation period. This consolidation creates the flag part of the pattern. The breakout from the flag generally signals a continuation of the move higher.

The high tight flag is considered to be one of the most bullish chart patterns that a stock can form. This is because it requires such a strong move higher to form the initial part of the pattern which shows very strong institutional demand for the stock. This huge advance in price then consolidates near highs without giving much progress back which tells us that even though it just had a massive move higher, nobody is interested in selling yet.

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Hight Tight Flag Criteria

This rare bull pattern forms after a stock gains 100% or more in only 4 to 8 weeks and consolidates while pulling back less than 25% over the course of the following 3 to 5 weeks.

This setup is then completed when the stock breaks out of the flag to new highs on above-average volume. The flags that have a downward slope generally outperform those that don’t, similar to the downward slope in the handle of a cup and handle pattern.

The prior uptrend of 100% or more in 4-8 weeks
The base depth is 10-25%
Buy point is the high of the flag plus 10 cents

Hight Tight Flag Psychology

This pattern is so powerful because even though the stock has already gained more than 100%, doubling in value, the pullback is extremely shallow which tells us there is nobody interested in selling. Generally when price increases over 100%, people want to take profits and the stock will pull back quickly as everybody tries to get out with a gain first. In the case of the high tight flag, the pullback being so shallow and staying near highs means that buying pressure is still very high and institutions are still buying the stock.

High Tight Flag Reliability

The high tight flag is a great pattern to trade because it has such a high probability of success. This is a rare pattern and when it does form, the stock generally continues higher after breaking out of the flag. The key to trading this pattern is to make sure that the initial move higher is very strong and that the consolidation period is relatively short and shallow.

When these criteria are met, the high tight flag is a high probability trade that can lead to some very large profits.

High Tight Flag Example

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Frequently Asked Questions

The High Tight Flag is a rare pattern. It’s often associated with innovative companies with new products that change our daily lives.

The High Tight Flag pattern is a rare and very bullish chart pattern, often seen in stocks with strong CANSLIM fundamentals. It forms when there’s a sharp rise in the stock’s price, followed by a short period of consolidation, creating a flag-like shape. A breakout from this flag usually means the upward trend will continue. This pattern is seen as very bullish because it shows that big investors are really interested in the stock and there’s not much desire to sell, even after a big price increase.

The High Tight Flag pattern can be identified by the following criteria: (1) a prior uptrend of 100% or more in 4-8 weeks, (2) a base depth (consolidation) of 10-25%, and (3) a breakout to new highs on above-average volume. Flags with a downward slope tend to outperform those without a slope, similar to the downward slope in the handle of a cup and handle pattern.

The High Tight Flag pattern’s psychology is demonstrated by the shallow pullback that follows a significant price increase. Typically, after a stock’s price doubles, investors tend to take profits, causing a swift pullback. However, in the case of the High Tight Flag pattern, the shallow consolidation near the highs indicates strong buying pressure and continued institutional interest in the stock, suggesting the potential for further gains.

The buy point for a stock with a High Tight Flag pattern is the high of the flag plus 10 cents. This level represents the breakout point, where the stock is expected to continue its upward momentum on above-average volume.

The High Tight Flag pattern often forms in stocks with strong CANSLIM fundamentals, indicating that the stock has a solid financial performance and potential for growth. The pattern suggests that the stock has attracted significant institutional demand, which aligns with the principles of the CANSLIM methodology.

Jump to: How the Volatility Contraction Pattern (VCP) can boost your trading strategy.

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