EIGH - BULLISH FLAG PATTERN CHART FORMATION

This is a Classic Flag Pattern Formation Chart Set-Up.

The bull run that began in the .04's and took this stock to .139 created the "flag pole." The flag pole is characterized by high volume buying pressure, where the bulls controlled the direction of the stock and pushed it to higher trading ranges. Now, as much as traders would like for stocks to go straight up, they do not, and they have to "cool off." The cooling off period is also known as the"consolidation" period. The stock consolidates or cools off from the highs, and basically comes down in price. This consolidation period is characterized by what many refer to as a "low volume pullback." What this means is that the buying pressure has dissipated, and some sellers have entered the market, but the good news is that the consolidation volume is lower than the bull run volume. (Many times the volume will decrease below the daily average volume during consolidation.) This particular consolidation period has found a trading range and trading channel that has formed what looks like a "flag" on the chart. This flag is characterized by the drop in price as well as the drop in volume. Once the flag's trading channel runs out of room within the "flag-like" triangle, a break will occur. During an uptrend, this break is to the upside, but if the chart pattern breaks down, it will occur to the downside, signaling a breakdown in the chart and it's bullish pattern. Another key indicator regarding the flag pattern, is the closer the flag gets to being formed, the lower the volume drops. This is key. As the trading channel tightens, so does the volume. A breakout to the upside will confirm that the bulls are back in control of the stock, a bullish resurgence in volume will return, and higher trading ranges will be established. The current drop in price with low volume is exactly what traders want during a sustainable uptrend. Many traders will wait for a "break-out" to the upside of that flag as confirmation that the stock will continue to be bullish, and will enter after that "break-out." An entry after the upside breakout is less risky, but less profitable too. If an upside break-out occurs, the new low will be put in and the uptrend will continue.