Flags and Pennants

[bowman]

I'm partial to trading these two consolidation patterns when they break to the upside and I thought I'd post some charts as I find them.

Not sure If people would prefer them in a specific thread or to post them in the Potential Breakouts thread?

Thanks.

 

[beamstas]

I would appreciate this
(There is always something to learn)

I'd suggest keep it in this thread..
Then if someone wants to learn about these patterns it's all in one place

Brad

 

[saiter]

Some stuff on flags and pennants for newbies.

 

[carmen]

Im not really good at spotting these..Transurban is an awful looking chart but it looks like one formed Mar 13.

 

[MRC & Co]

There is no flag or pennant there Carmen.

Flags are great patterns though.

 

[sammy84]

Potential pennant here. Volume has lowered recently to an acceptable level. I wouldn't take this trade however as it is too close to nearby resistance, prefer it when such patterns form just on top

 

[bowman]

Cheers guys, we're off and running.

SDL is forming into a nice pennant pattern and is quite liqiud. Previous attempts to break from this level have failed at .12c

Nonetheless there could be some daytrade/short term trade opportunities here, and possibly a more sustained move up as well.

Generally speaking I'm a little cautious this week as there's more earnings reports and housing stats due from the US, so I'm mostly in daytrade mode.

It wouldn't take much to knock the wind out of the sails of the current rally.

 

[CanOz]

For those with Amibroker here is a nice little "Pennant" scan....Enjoy

CanOz

// Triangle search Extended

/*This scan/exploration extends the triangle search by Graham Kavanagh
The original scans for triangles using Highest High AND Lowest Low over a 20 bar period,
then next High over a chosen period after these HHV AND LLV. He requires the order of the
highs AND lows are to be in alternate order and his test will pick up ascending, descending
AND equal triangles. His 'variable' d1 (set to 20)is the number of days to lookback and search
for the last Highest High, AND d2 is the gap after this HH to start searching for the next HH
after the first. Similarly for the Lowest lows
The variables z? represent the highs, AND w? the lows.

This extended program adds a number of options,as follows:-
a. It automatically searches over different lookback periods between d1max and d1min, set to
60 and 20 (but easily changed) and records all succeses. Because of the nature of triangles,a
single value for d1 can miss many valid cases.
b. Where the triangle criteria are satisfied on successive days, only the last of these is retained
in order to reduce the amount of output.
c. The user can toggle between searches based on the data H and L, or the highs and lows of the candle body.
d. The lengthy test to yield a "buy" in the original has been broken down into 7 separate conditions,
allowing the user to easily change the conditions. Thus, Condition 3 tests for the triangle shape. This can
use a more liberal test via the parameter toggle that has been added. Similarly, Cond5 is a volume test which
can now be left in or excluded.
Finally, the user should note that conds 6 and 7 test that the general price trend is up. If interested in
potential downward moves, a user might want to delete these from the "buying" test.
*/

d1max = 60;
d1min = 20;
Buy = 0;


for (d1=d1min;d1<d1max;d1++)
{
d2=4;
Hi = H;
Lo = L;
Body = ParamToggle("Use candle body rather than H & L","No|Yes", 0);
if(Body == 1)
{
Hi = Max(O,C);
Lo = Min(O,C);
}
z1=HHV(Hi,d1);
za1=HHVBars(Hi,d1);
zb1=za1-d2;
z2=HHV(Hi,zb1);
za2=HHVBars(Hi,zb1);
w1=LLV(Lo,d1);
wa1=LLVBars(Lo,d1);
wb1=wa1-d2;
w2=LLV(Lo,wb1);
wa2=LLVBars(Lo,wb1);

aa1=LastValue(Hi);
aa2=LastValue(Lo);

C3 = ParamToggle("Use a more liberal triangle shape test?", "No|Yes",0);
ExVol = ParamToggle("Exclude volume test?","No|Yes",0);

Cond1 = ((z1>=z2 AND w2>w1) OR(z1>z2 AND w2>=w1));//Allows for horizontal top or bottom
Cond2 = za1>za2 AND wa1>wa2;//Automatically satisfied if za1,za2,wa1 and wa2 all exist
//Cond3 ensures triangle shape
Cond3 =((za1>wa1 AND wa1>za2 AND za2>wa2) OR (wa1>za1 AND za1>wa2 AND wa2>za2)) ;//Original
if(C3 == 1)
Cond3 =((za1>wa1 AND wa1>za2) OR (wa1>za1 AND za1>wa2)) ;//a more liberal test

Cond4 = aa1<z2 AND aa2>w2 ;// Triangle shape continues to last Value

Cond5 = Ref(Volume,-za1) > MA(Volume,d2);
if(ExVol == 1) Cond5 =1;
//Conditions 6 & 7 require close price trend to be up
Cond6 = Ref(MA(Close,d1),-za1) > Ref(MA(Close,d1),-2*za1) ;
Cond7= MA(Close,d1) > Ref(MA(Close,d1),-2*za1);
Buying = Cond1 AND Cond2 AND Cond3 AND Cond4 AND Cond5 AND Cond6 AND Cond7;
Buy = Buy + Buying;
}
for(i=1;i<BarCount;i++)
if(Buy>=1)
{
Buy[i-1]=0;
Buy = 1;
}
//Retain only the last of consecutive buy signals

Filter=Buy;
/*
NumColumns = 8;

Column0 = z1;
Column1 = z2;
Column2 = w1;
Column3 = w2;
Column4 = za1;
Column5 = za2;
Column6 = wa1;
Column7 = wa2;
*/

NumColumns = 8;
Column0 = Cond1;
Column1 = Cond2;
Column2 = Cond3;
Column3 = Cond4;
Column4 = Cond5;
Column5 = Cond6;
Column6 = Cond7;
Column7 = Buy;

 

[nomore4s]

For those with Amibroker here is a nice little "Pennant" scan....Enjoy

CanOz

Thanks CanOz, will have a play around with that.

 

[bowman]

Here's an interesting one to keep an eye on - CXY.

Broke up in late March from a Flag pattern and then broke down and retraced from a Pennant pattern.

Might find support at an old resistance level and consolidate and/or bounce again.

 

[Wysiwyg]

Really good education thread everyone. Excellent.





.

 

[sinajee]

I agree with WYSIWYG, thanks for the input everyone. GREAT STUFF:iagree:

 

[jrobbo]

I'm a newbie at this. but how about this one of Macquarie Comms Group:


John

 

[skc]

I'm a newbie at this. but how about this one of Macquarie Comms Group:
View attachment 29501

John

Can't get anything that looks more like a flag.

However, MCG is the subject of a takeover bid at $2.50. If you trade this stock you are basically taking a view that someone will bid above $2.50. See the MCG thread in this forum. Current market prices below the bid price indicate people have doubts about the bid going ahead.

Also, it will be difficult to set limit order to trade any breakout. Chances are the price will simply gap up if there were to be announcement of a new bid. If you do want to play, make sure you have limit-stop orders so you don't chase too far.

Apologies for mixing fundamental views in a technical thread.

 

[Johno]

TOE

 

[skc]

Some stuff on flags and pennants for newbies.

Thanks Saiter. What's the book?

 

[sammy84]

Bought BTA today on the basis of a pennant. Took a conservative entry however by buying at the break of the high set a few days back. Did this because 1) Unsure about overall Market direction 2) Slight bearish divergence present and 3) There is some overhead resistance nearby at the 80c mark.

The high close looks promising for tomorrow, so hopefully it gives the trade some room and it becomes 'free'.

 

[saiter]

Thanks Saiter. What's the book?

It's called Encyclopedia Of Chart Patterns, 2nd Edition by Thomas N. Bulkowski. You can find it on most torrent sites.

 

[saiter]

Flags in the current rally for the DJIA.

 

[MRC & Co]

Couldn't call that 3rd one a flag Saiter.

Bowman, nice posts, particularly the second one, noting we may find support at the previous resistance. A good place to buy if we are in an uptrend previously.

Along with double tops and bottoms, flags are my favourite 'traditional technical pattern'.