High Tight Flag Pattern: 3 Simple Steps to Trade this Rare, Explosive Setup

Enjoy this post? Share the love.

high tight flag

The High Tight Flag pattern is a rare, extremely explosive chart pattern that often leads to triple-digit gains in a short period of time. Here, we show you 3 easy steps to identify and profit from the High Tight Flag.

In a bull market, most of the growth stocks we buy in The Wagner Daily model portfolio are breakout setups from a either a flat base or cup with handle chart pattern.

Both the base breakout and cup and handle patterns are relatively common in a bull market, but the High Tight Flag is uncommon.

Only a few stocks during any bull market are strong enough to form the rare High Tight Flag pattern.

However, taking the time to seek out this pattern is well worth your time!

If correctly identified, the High Tight Flag often leads to triple-digit gains within a short period of time.

Continue reading to discover key traits to help you properly identify and bag big gains from trading the High Tight Flag pattern.

How to spot the High Tight Flag pattern: 3-Step Checklist

The High Tight Flag pattern, a type of bull flag pattern, was first introduced in William O’Neil’s “must-read” classic, How to Make Money in Stocks.

Look for stocks with the following three key attributes to properly identify a High Tight Flag pattern:

1. An explosive move of +100% or more in 8 weeks or less

The move is measured from the top of the last base (breakout level) up to the stock’s recent high. However, we measure from the start of the rally if there is a clear breakout from a lower resistance level (as in our $UPST example below). Avoid stocks that jump 100% in just one or two weeks merely due to a monster opening gap of around 40-50%.

2. A shallow pullback (10-25% off the recent high) that is 3-5 weeks in length

An explosive move followed by a shallow consolidation is a big clue that the current rally may have a lot more gas left in the tank.

3. Revolutionary technology or product

Although there are rare exceptions, most stocks that form a High Tight Flag pattern are associated with cutting-edge technology or products. Below are a few companies whose stocks formed this pattern in the past (source):

Stun gun manufacturer Taser (now $AAXN) in 2003

Mobile 4G LTE inventor Qualcomm ($QCOM) in 1999

Birth control pill manufacturer Syntex in 1963

TV maker Zenith in 1958

AI lending platform Upstart ($UPST)–right now.

Note this third trait is not a requirement, but it helps put the odds in your favor.

Upstart ($UPST) forms a High Tight Flag pattern

Upstart ($UPST), a groundbreaking lending platform driven by artificial intelligence, recently formed a High Tight Flag pattern.

Let’s take a look at the daily chart:

Press image to view full-sized chart

The chart above shows the entire advance, as measured from the strong gap off the 50-day moving average (Aug. 11) up to the September high.

The rally from the gap up breakout to the September high was a massive advance of more than +140% in just seven weeks.

An explosive move of +100% or more in less than 8 weeks? CHECK!

Note the August 11 gap up was powerful, but not excessive.

The pullback (from Sept. 23 high to Oct. 4 low) was only 19% deep, and closed below the 20-day moving average for just one day before reversing higher.

A shallow pullback (10-25% off the recent high) that is 3-5 weeks in length? CHECK!

Well, the pullback was actually only two weeks long, but a shorter pullback is more bullish than a longer one.

Zooming out to the longer-term weekly chart makes the High Tight Flag pattern more recognizable.

As annotated on the chart, $UPST broke out of its base and rallied +140% over a seven-week period:

Press image to view full-sized chart

Finding the ideal entry point to buy a High Tight Flag pattern

We bought $UPST in the Wagner Daily report after identifying the High Tight Flag, and the initial entry is currently showing a gain of +18%.

Let’s walk through this real trade to show you the exact entry points we alerted subscribers to, and why we bought where we did.

10 cents above the high of the consolidation

The standard buy point for a High Tight Flag is 10 cents above the high of the consolidation base.

However, when possible, we prefer to enter a bit earlier with several partial buys to avoid buying a full position on the breakout.

Experience has taught us it can be psychologically challenging to hold a full position from the initial entry point because a false breakout sometimes precedes the real breakout.

Scaling in to the trade makes it easier to hold through a normal shakeout that often follows.

When the price action allows, we prefer to build a position with 2-3 partial buys.

This means we typically have no more than 20% to 30% of the position size near the obvious breakout point.

Our $UPST entry points on the High Tight Flag

Whenever we enter a new Wagner Daily trade, we notify subscribers of the exact percentage allocation in the Model Portfolio.

This enables members to mirror the proper size of any partial buys into a position.

We scaled in to $UPST with three separate buy entries, which are annotated on the daily chart below.

A text explanation with more details follows:

Press image to view full-sized chart

After identifying the High Tight Flag pattern, our first clue for the initial buy entry was the bullish reversal candle that formed on October 6 (figure “1”).

That candlestick reclaimed the 10 and 20-day exponential moving averages on increasing volume (bullish).

We did not buy on that day, but we added $UPST to the newsletter watchlist after the bullish reversal candlestick formed.

As the price pulled back to the 10-day EMA and found support, we bought our first partial position of $UPST on October 8 ($310.55).

We added to the position the following day ($314) as we received more bullish confirmation from the price breaking above a short-term downtrend line on the hourly chart.

We also liked that the prior day’s candlestick (October 8) was a tight-ranged inside day.

We finally entered our last part of the position on the breakout above the September high ($349).

As of the October 18 close, our buy entries are showing gains of +23%, +21%, and +10% respectively.

Exit strategy

Since the High Tight Flag pattern often leads to monstrous, triple-digit gains, we are not looking to sell $UPST for a quick 20% gain.

It can be a challenge to resist the urge to sell stocks that explode higher right out of the gate.

However, it’s crucial to let your winners ride as long as the price action remains bullish–especially with the rare High Tight Flag pattern.

To help us hold, we use shorter-term moving averages such as the 5-day EMA.

We fight the urge to sell partial size as long as the stock continues to close above its 5-day EMA.

We definitely do not want to sell the full position until there is either a break below the 10-day EMA, or some sort of climatic move to sell into strength–whichever comes first.

Subscribe now to The Wagner Daily to be instantly alerted when we take profits on this trade, and to receive your daily stock trade signals with exact entry and stop prices.

FAQ about the High Tight Flag Pattern

What is high tight flag vs flag?

A “high tight flag” is a specific type of “flag” pattern in technical analysis that is characterized by a sharp, vertical price increase that forms the flagpole, followed by a small and tight trading range that forms the flag.

The “high tight” aspect of the pattern refers to the steep and vertical nature of the price increase that creates the flagpole, which is different from a regular flag pattern where the flagpole is typically not as sharp or vertical.

Overall, a high tight flag pattern is simply a traditional flag pattern, but with a steep and vertical flagpole that makes it a stronger and more reliable bullish reversal pattern.

Traders often view a high tight flag pattern as a more significant signal for a potential buying opportunity, as the sharp and vertical price increase is considered to reflect a high level of momentum in the stock.

Are high tight flags rare?

High tight flags are considered to be less common than other chart patterns. However, it’s difficult to determine exactly how frequently high tight flags appear, as it can depend on various factors such as the time frame, market conditions, and the number of stocks being analyzed.

The steep and vertical nature of the flagpole in a high tight flag pattern requires a strong and sustained increase in stock price, which is not always seen in the market. Additionally, the small and tight trading range that forms the flag also requires a high level of momentum and volatility to maintain.

How do you scan for high tight flags?

Powerful chart scanning platforms such as TC2000 can be programmed to automatically scan for the specific pattern that comprises a high tight flag.

You can also manually scan for a flag by utilizing the 3-step checklist detailed in this article:

1. Look for an explosive move of +100% or more in 8 weeks or less
2. Look for a shallow pullback (10-25% off the recent high) that is 3-5 weeks in length
3. Does the company have a revolutionary product or technology?

Finally, paid subscription services such as The Wagner Daily can alert traders to potential opportunities when high tight flag patterns develop.

Is a rising flag bullish?

Yes, a “rising flag” is considered a bullish chart pattern in technical analysis. It is a pattern that occurs after an uptrend and is characterized by a consolidation period where the stock price moves sideways in a narrow range. The pattern suggests that the stock price is pausing after a strong upward move, and that the upward momentum is likely to continue once the stock breaks out from the flag pattern.

Traders often look for a bullish flag pattern as a potential buying opportunity, and will usually buy the stock when it breaks out from the top of the flag pattern. The pattern is considered more reliable if the consolidation period is short and the volume during the pattern is high.

Enjoy this post? Share the love.

Please leave your comment below!

Your email address will not be published. Required fields are marked *