Advanced Micro Devices, Inc AMD, Expedia Group, Inc EXPE and Lululemon Athletica, Inc LULU 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 lower between a channel with parallel lines.
- For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downwards within the following channel 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.
- 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.
The Advanced Micro Devices Chart: On Oct. 7 AMD broke up from falling wedge, back tested the upper descending trendline of the pattern and on Oct. 12 began a 49.2% ascent to a Nov. 9 all-time high of $155.66. The stock has since consolidated the move to drop the relative strength index. The consolidation has settled AMD into a bull flag pattern with the pole created between Nov. 1 and Nov. 9 and the flag between Tuesday and Thursday.
The Expedia Chart: Expedia gapped up over 3% higher following its Nov. 4 earnings print. The stock then soared about 11% higher to reach a new all-time high of $191.85 and has spent the past three trading days consolidating the move, which has settled the stock into a bull flag pattern.
Although the bull flag may still be recognized, because it hasn’t lost support of the eight-day exponential moving average (EMA), traders should note Expedia has also created a bearish double top pattern at the all-time high that could be recognized.
The Lululemon Chart: Lululemon reversed into an uptrend on Oct. 12 and has created a series of consistent higher highs and higher lows on the daily chart. The stock hit a Nov. 4 all-time high of $478.66 and has spent the past five trading days consolidating the move.
Like AMD, the rise paired with the consolidation has settled Lululemon into a bull flag pattern on the daily chart, although traders should be aware the stock likely needs to regain the eight-day EMA for the pattern to be recognized.
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