FuelCell Energy, Inc (NASDAQ: FCEL), Nike, Inc (NYSE: NKE) and SoFi Technologies, Inc (NASDAQ: SOFI) have all settled into bullish flag patterns on the daily chart. The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock either lower between a channel with parallel lines or into a small tightening triangle.
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For bearish traders, the “trend is your friend” (until it’s not), and the stock may continue downwards within the following flag for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
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Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.
A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.
See Also: Five Common Day Trading Patterns To Know
The FuelCell Chart: FuelCell shot up over 50% higher between Oct. 6 and Oct. 18 and then entered into consolidation in the form of a bull flag. The consolidation is needed to drop FuelCell’s relative strength index, which hit an uncomfortable 73% on Monday. FuelCell’s flag is being formed in a tightening triangle pattern and bulls can watch for a break of the upper descending trendline before Oct. 25.
The Nike Chart: Nike reversed course into an uptrend Oct. 1 and soared 10% higher before cooling off. The rise between Oct. 1 and Oct. 18, paired with Tuesday and Wednesday’s consolidation, has formed a bull flag pattern on the daily chart.
The SoFi Chart: On Tuesday, SoFi attempted to break up from a descending trendline that has been holding the stock down since it reached a Feb. 1 all-time high of $28.26. SoFI may need to consolidate under the trendline in order to garner the strength to break upward for a longer period. So far, the consolidation has settled SoFi into a bull flag pattern, with the pole created between Oct. 11 and Oct. 18 and the consolidation beginning on Tuesday.
Photo courtesy of Nike.
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