Advanced Bull Flag ConceptsHave you ever wondered why price action sometimes forms a bull flag pattern?
Have you ever wondered if there is a way to predict whether a bull flag will break out before it actually does so?
In this post, I will try to address these questions by presenting a couple of theories about the nature of bull flags.
Bull Flag Theories
(1) The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole; and
(2) Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so.
I will try my best to clearly explain both theories in detail below.
Note: Although this analysis is also generally true for bull pennants, bear flags, and bear pennants, to keep things simple I will focus solely on bull flags. Additionally, this analysis is generally true across timeframes.
Part I - The Basics of a Bull Flag
First, let's begin with the basics. As shown in the image below, bull flags form when an asset is in a strong uptrend. The uptrend forms the flagpole of the bull flag structure.
The flag structure forms when price consolidates, usually in a falling trend. This consolidation phase is often characterized by price oscillators rotating back down while the price retraces only a small part of its prior upward move.
From a market psychology perspective, bull flags often form when most market participants who bought the asset continue to hold it expecting the uptrend to resume, while only a minority of market participants sell (or short the asset) as its price corrects downward. The bull flag pattern is a continuation pattern because it reflects the market's general expectation that price will eventually resume its upward move.
Once the price definitively breaks above the upper channel of the flag (often with strong momentum and high volume), the bull flag pattern is validated. Upon breakout, the expected move up is equal to the vertical height of the flagpole.
Part II - The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole
Here's where things begin to get interesting. Below is the golden ratio.
Two quantities, a and b (where a > b ), form the golden ratio if their ratio is the same as the ratio of their sum to the larger of the two quantities. (See the equation below)
The equation above shows the Greek letter phi which denotes the golden ratio. Phi is equivalent to a/b when such ratio is also equivalent to (a + b)/a.
Although bull flags can take various forms, it is my hypothesis, based on chart analysis and research, that the most perfectly structured bull flags (ones that also have the highest probability of successful breakouts) occur when the flag forms a golden ratio to the flagpole.
Mathematically, this means that the vertical height of the flagpole is equivalent to (a + b) and the vertical height (i.e. the width) of the flag is equivalent to b. This is also to say that price retraces down to the 0.382 Fibonacci level as measured by applying Fibonacci retracement levels along the flagpole (or to the 0.618 point on the vertical height of the flagpole if one measures from the bottom to top).
I realize that this can be quite confusing, so let’s walk through some visualizations.
Let's first visualize this hypothesis using the golden rectangle. Below is an image of the golden rectangle. A golden rectangle is composed of a square (with sides equal to a) and a smaller golden rectangle (with width equal to b and length equal to a).
Now let's rotate the golden rectangle to better visualize the hypothesized flag pattern.
The bull flag is hypothetically an approximation of the golden rectangle, whereby the width of the flag is in a golden ratio approximation to the length of the flagpole.
In the illustration below, there are multiple bull flags contained within a Fibonacci spiral. The spiral is made up of golden rectangles, with each larger golden rectangle containing a smaller golden rectangle inside it. The smaller golden rectangle is the flag structure, and the length of the larger golden rectangle is the flagpole.
One can think of the Fibonacci spiral and the golden rectangles as a series of bull flags that build on top of each other in a repeating pattern. In this diagram, price is represented by the increasing length of the sides of each golden rectangle. In other words, the price on a chart can be seen as spiraling higher after each bull flag breakout.
Of course, not all bull flags form a structure that approximates the golden ratio, but it is my belief that in forming a bull flag, price action is aspiring to achieve as close of a golden ratio approximation as it can. I believe that the bull flags that best approximate the golden ratio structure also present the highest probability for a successful break out.
To learn more about Fibonacci spirals, including the golden spiral that Fibonacci spirals approximate, you can check out this Wikipedia article: en.wikipedia.org
Part III - Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so.
To see how Fibonacci levels and regression analysis can give insight into whether a bull flag will break out or break down before it does so, let's consider an example.
Let’s consider the massive bull flag that the iShares Russell 2000 ETF (IWM) formed in 2021.
In 2021, the monthly chart of IWM formed what appeared to be a bull flag, as shown below.
Now let's see why Fibonacci analysis and regression analysis were warning that this bull flag was not likely to break out successfully.
First, IWM's price did not retrace to a Fibonacci level before attempting a breakout (when using the pole as the Fibonacci retracement reference point). In the chart below, we see that price tried to break out, without even so much as retracing down to the highest Fibonacci retracement level: $196.71. By not undergoing Fibonacci retracement, price did not give its oscillators the opportunity to rotate back down fully. Instead, price remained overextended at the time it attempted to break out.
Now let's look at regression analysis. Below is a log-linear regression channel that contains IWM's entire price history. As noted in my prior posts, a regression channel simply indicates how far above or below the mean (or average) price an asset's current price is trading. In the regression channel above, the red line is the mean price, the upper channel line is 2 standard deviations above the mean, and the lower channel line is 2 standard deviations below the mean.
A successful breakout of the bull flag would have taken IWM's price way above its regression channel, to a level that is too many standard deviations above its mean price for us not to question the probability of the breakout’s success. Achieving the full measured move up would have been extremely unlikely, assuming that the regression channel is valid and that price tends to revert back to its mean over time. What was more likely than a breakout was a breakdown, and a reversion back to the mean, which is what ended up happening with IWM.
Another interesting note about IWM’s bull flag is that it presented a false breakout in November 2021. This false breakout was presenting multiple warnings signs including being a UTAD test of a Wyckoff Distribution. As shown below, however, another important clue that the November 2021 breakout would likely fail was that the breakout was not confirmed when comparing IWM to the money supply (M2SL). See the chart below.
One can interpret this chart to mean that in late 2021, IWM’s price was rising because the central bank was increasing the money supply, but not due to improving strength of the underlying companies that comprise the ETF. Using the money supply as a ratio to an asset elucidates the true inherent strength of the asset's value. To understand more about why the money supply can be used in this manner, you can check out my post below.
Part IV - Additional Comments
I have a few additional comments. I usually use Fibonacci levels on a log-scale chart to identify Fibonacci spirals because Fibonacci spirals are logarithmic spirals. However, when using Fibonacci levels based on log scale, the ratios, percentages and numbers, can seem quite confusing because they are logarithmically adjusted. If you choose to replicate my process, please be mindful of this. While using log-scale charts is critical for higher timeframes (e.g. the monthly chart or higher), I have not identified much benefit to using it on shorter timeframes.
In a prior post, I noted that Plug Power (PLUG) is currently forming one of the best-looking log-scale, golden ratio bull flags I have ever seen. If my above hypotheses are true, I would expect to see PLUG move dramatically higher in the years to come. For more information about PLUG, you can read my post linked below. (This is not a solicitation to buy PLUG. Please do your own research and carefully consider all risks.)
At the risk of making this post too long and too dense, I just want to briefly note that it is also my hypothesis, based on observation and research, that the golden ratio is where many S-curve dilemmas are solved. If you don't know what an S-curve dilemma is and you'd like to read about this you can see my post below about Jumping S-Curves .
In short, an S-curve dilemma is another way of conceptualizing the question of whether a bull flag will break out or break down.
I hope that someone finds value in this post. I spent a lot of time studying, researching, analyzing, and cogitating the mathematical nature of price action to reach many of the conclusions here. Thank you for your valuable time in reading my post.
PLUG
Does history repeat itself?The previous correction cycle, after breaking the local low, ended with a cup and a nice bounce came.
The current situation is reminiscent of the previous one.
However, if there is a similar volume of short closing now, the down trend of about two years can easily be broken.
I also see signs of this on a larger time plane, on a weekly chart.
Strong bullish MACD divergence
Strong bullish MACD divergence on a weekly chart.
I think we are close to the breakout.
Plug Power -> Another 10.000% PumpMy name is Philip, I am a German swing-trader with 4+ years of trading experience and I only focus on price action and market structure 🖥️
I am trading the higher timeframes because this allows me to massively capitaliz e on the major market swings and cycles without getting caught up in the short term noise.
This is how you build real long term wealth!
In today's anaylsis I want to take a look at the bigger picture on Tesla.
Looking at Plug Power stock you can see that after the recent -90% correction Plug Power is now retesting a cluster of support zones from which we could see a decent move higher. Keep in mind that this is a very risky stock so keep your risk small on this trade.
- - - - - - - - - - - - - - - - - - - -
When the market moves where, and how, and if - these are all unknown.
The only thing which you can control is your risk.
- Philip Basic Trading -
Keep the long term vision🫡
PLUG CallBuy Oct-06-23 8 Calls @ 0.18 Limit to Open
CCI oversold, Squeezed by Bollinger Bands and at small but critical support with the SR Channel.
Bought for 1.5 week expiration.
PLUG | Buy zones | Hydrogen risingGeneral
Looking at 2 zones where i will buy equally amounts of PLUG for longterm hold.
First buy zone is based on the support zone that generated the recent swing high (red circle).
Main buy zone is a resistance level that gave support after it was broken for the big upswing.
Target: Correlation between 50% of the weekly range and top of the last swing.
Stop-Loss: None (Long term investment)
Good luck
Disclaimer:
- This information does not constitute as financial advice and is only for educational purposes. I am not your financial advisor.
- You trade entirely at your own risk
- Make your own research
- Finance and trading is evil, capitalism is bad, duh ;)
PLUG | InformativeNASDAQ:PLUG
If the price of PLUG breaks above the bullish line of 12.22, it may indicate a bullish signal, suggesting potential upward price movement. In this scenario, the target price could be set at 12.98.
Conversely, if the price of PLUG breaks below the bearish line of 11.99, it may suggest a bearish signal, implying potential downward price movement. In this case, the target prices could be set at 11.75, 11.49, and 11.17.
I'm bearish; we have a bearish engulfing on the daily chart and a few gaps below the current piece.
PLUG rises on EV Sector strengthPLUG on the daily chart demonstrates a VWAP breakout having first trended down
into the lowermost VWAP bands from anchored VWAPs originating in November 2022
and January 2023. Fundamentally, PLUG is burning cash but less of it with each
succeeding earnings report. In the past two months price has ascended through a
couple of VWAP lines and has now crossed the mean VWAP in a sign of bullish momentum.
Price bounced up from the POC line of the volume profile in a demonstration of bullish
buying power and buyers defending that support level.
The dual RSI indicator shows that the 3-hour time frame RSI line in blue crossed over the
slower weekly time frame RSI line in black about June 28 and they are both above the
50 level is another bullish sign. On June 30, the zero-lag MACD had its lines descend to the
horizontal zero line and bounce upward over a positive histogram. The relative volume
indicator shows increasing overall volumes with the mean rising from 15M to 26M daily
overall. The presumption is that increasing volume supports price action while decreasing
volumes would cause price and volatility stagnation.
From this analysis, I conclude the time is right for a long-swing trade of PLUG. i will
zoom into a 15-30 minute time frame seeking a pivot low from which to enter using
a stop loss of 12.15 and targeting those upper aVWAP bands/lines.
NKLA round bottom reversalNKLA has reversed a trend down in the past week as it clear concerns with potentially being
delisted with NASDAQ. The symmetry in the trends is shown with an arc overlaid. This
brings to mind a cup and handle pattern in progress. It seems likely the NKLA will have
a bullish continuation from the good news of stability of its NASDAQ listing. Potential
buyers on the sidelines may take positions and generate momentum. I will trade a long
trade early in this upcoming shortened trading week. The longer-term anchored VWAP provides
support as so just under that will be the stop loss. The first target is 1.70 which was a
resistance level a few weeks ago.
PLUG rises out of retracement of previous uptrendPLUG on the 4H chart presents healthy price action. It uptrended for a month starting
in mid-May and then completed a 50% Fibonacci retracement from which it pivoted on
Tuesday, June 27th. The zero-lag MACD shows a classical cross of lines under the histogram
while the histogram was changing from negative to positive. Likewise, the RSI bottomed out
at 32 and ascended to 55. All things pointing toward a well-established reversal, I will
open a long trade here targeting the previous pivot high of 11.75 ( a tweezer top) on
June 14th. The stop loss is 9.8 at the level of the pivot highs of June 7th. The trade potentially
offers 15% profit in a week or two with minimal risk.
WKHS reverses in sync with NKLAWKHS is in similar circumstances as NKLA in the potential for a delisting due to low share
price. NKLA has been cleared and is a bit above $1.00 ( see my bullish bias idea)
Here WKHS is below $1.00 but is apparently reversing. On the 30 minute chart, price is rising
and is above various VWAPs anchored to the left at various points. The last trading day
saw a price rise of over 8% Relative volatility has changed from red to green and is above the
running average. The zero-lag MACD shows parallel lines rising above the histogram. The three
in one indicator shows that money flow, RSI movement and momentum are all bullish.
I see the setup as sufficient for potential profit given the risk. I will take a long trade here
selecting an exact entry on a lower time frame chart. The stop loss will be just below the VWAP
lines at $0.8335. ( A rising tide lifts all boats? - FSR FCEL PLUG AND NKLA are rising . so
are TSLA and Ford- I love the buoyancy !)
Time to buy PLUG? The PLUG short I posted a while back turned out to be right-on-the-money. Now I wonder if it's time to scale back in.
PLUG has been absolutely hammered and is lagging behind the recent rally. I trade based on technicals, so I have no fundamentals to point to as to why this might be the time to buy PLUG, but looking at the chart, I can't help but think: Who the hell is selling here?
We've clearly established some local support around HKEX:9 here, supported by the VPVR spike circled on the right.
I think this is going to come down to macro trends, so this idea could easily get invalidated. But I've marked some targets based on previous levels I'll be looking to take profit on if we do see the rally I'm hoping for.
If this idea^ doesn't sound all that convincing, then don't buy, I don't blame you. I would consider this a pretty aggressive entry point, but I'm not watching the market closely enough to wait around for more clear indicators of a reversal.
So I'm yolo'ing in and will set an alert to prompt me to stop out if I'm wrong. I already got stopped out of my previous re-entry attempt, which is also partly which I'm scaling in.
I also marked a mega-bear target, in case I'm horribly wrong and the market nukes or continues to slowly bleed down for some reason.
Happy trades,
CD
PLUG My We can see price has been trading within the 10.75 and the 9.25 zones since the middle of March. Today we saw a strong push upwards that may continue and end up breaking to the outside towards the 12.25 zone. We'll keep an eye on this stock and react accordingly.
PLUG SHORT OVER Bought Over bought. Plug Plower, although promising company & tech, NASDAQ:PLUG still has a long way to go, long term 30$ might be a steal for a company as promising as this but for now I expect a correction down to $25.
$PLUG: unloved IRA beneficiaryPotentially a bottom here, $PLUG has come down a long way here and has a low risk setup to capture a mean reversion move towards resistance from the most recent quarterly report.
Worth a punt as a short term trade, could evolve into a longer lasting bottom too.
Best of luck!
Cheers,
Ivan Labrie
Is Plug (NSDAQ:PLUG) Bearish Or A Strong Buy?NASDAQ:PLUG
About Plug Power
As the top supplier of complete hydrogen fuel cell (HFC) turnkey solutions, Plug Power is fostering the development of the hydrogen economy. In the midst of a persistent paradigm shift in the power, energy, and transportation sectors to address climate change and energy security, while delivering efficiency benefits and meeting sustainability targets sustainability targets, the company's breakthrough technology powers electric motors using hydrogen fuel cells.
The first market for hydrogen fuel cell (HFC) technology was established by Plug Power. Because of this, the Company has installed more fuel cell systems for e-mobility than any other company in the world, and it also holds the record for buying the most liquid hydrogen thanks to the construction and operation of a hydrogen highway throughout North America.
Furthermore, Plug Power offers end users a major value proposition that includes significant environmental advantages, efficiency improvements, quick refueling, and lower operating costs. The vertically integrated GenKey system from Plug Power brings all necessary components together to supply power, fuel, and service to clients including Amazon, BMW, The Southern Company, Carrefour, and Walmart. The company is currently utilizing its expertise, modular product architecture, and fundamental clients to quickly enter additional important areas, including as robots, data centers, and on-road zero-emission vehicles.
Is PLUG a BUY or is it still BEARISH?
Tradingview reports that 19 out of 30 analysts rate the Plug Power stock as a "strong buy", two analysts rate PLUG as a "buy", and the remaining nine analysts rate it as a "hold" with a maximum estimate of USD 78.00, an average estimate of USD 29.31, and a minimum estimate of USD 13.00. The current PLUG stock price is USD 13.12.
The predicted EPS for Q4-2022 is expected to increase by 0.07 to -0.23 from the reported EPS 0.30 from the previous quarter. Analysts predict that the EPS will decrease annually by 0.25 from -0.82 to -1.07 when compared to the reported EPS from 2021.
According to predictions, income will increase 2022 compared to 2021, by about 80%.
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Disclaimer
Norvestio AS only offers analysis based on analyst estimates and historical data, and our articles are never meant to be taken as financial advice. It doesn’t represent an advice to buy or sell any stock, and it doesn’t take into consideration your goals or financial position.
Plug PowerThis is a 2-month chart (each candle represents a 2-month period) of Plug Power (PLUG). For those who are not already familiar, PLUG is an alternative energy company that develops and manufactures hydrogen fuel cell systems.
I recently added PLUG to my portfolio as a long-term investment. In my opinion, it has one of the best long-term charts of any stock right now in terms of the potential for outsized gains in the future. I will explain my reasoning below.
Chart Analysis
The 2-month chart below shows the entire price history of PLUG.
Throughout much of its history, PLUG was resisted by the EMA ribbon (yellow and red lines). The EMA ribbon is a collection of exponential moving averages that act as resistance when price reaches it from below and support when price reaches it from above.
If we zoom in (see below), we can see that the EMA has tightened together and PLUG's price is now sitting right on the ribbon. When moving averages tighten like this, they can act as fairly strong support when the price falls to the moving averages from above.
Each time PLUG's price has fallen below these moving averages buyers have stepped in, thus causing lower wicks to form. This suggests the market is validating the support of these moving averages.
We can see in the chart below that the moving averages held as support even as the Stochastic RSI oscillated down. This is bullish.
Indeed, PLUG is forming a bull flag pattern on the log-scale, higher-timeframe chart. A bull flag of this nature can signal a potentially lucrative investment opportunity.
For those who read my post on using the money supply to gauge whether an asset is wealth-building, you would know that before entering a long-term investment position in PLUG one should first analyze the asset's chart relative to the money supply. (I've linked to this post in the related ideas below)
In the above chart, we see the performance of PLUG relative to the money supply (M2SL). This chart tells us that throughout much of its history, PLUG was a wealth-losing investment asset since the stock's price moved down over time relative to the money supply. The EMA ribbon largely acted as resistance.
However, the chart above shows that the moving averages are tightening together and that PLUG's price is consolidating within these tightening moving averages. This is a quite bullish sign. If a breakout occurs, an investment in PLUG could prove to be quite lucrative.
In the chart below, I apply Fibonacci levels to the length of the pole that forms the bull flag. We can see a perfect Fibonacci retracement is occurring, as price is finding support at the 0.618 level on the log-adjusted chart.
If the bull flag breaks out and a full Fibonacci spiral occurs, PLUG's price can move dramatically higher in the months and years to come.
In the below chart, I construct the Fibonacci levels using the all-time peak to all-time low. I drew projection arrows to show two plausible growth possibilities.
On a more complex, mathematical analysis, PLUG appears to be priming itself to "jump S-curves".
For a more in-depth analysis on what "jumping S-curves" means, you can read my post on the topic linked below. In short, I explain that price action can be graphically represented as a logistic function. Jumping an S-curve occurs when an inflection point is reached whereafter price begins to explode higher at a nearly exponential rate.
When the price of a company's stock jumps S-curves, there is usually some major impetus with regard to its earnings or profitability that occurs. For PLUG, that impetus could be hydrogen finally becoming a cost-effective form of energy. Hydrogen power is poised to benefit from multiple tailwinds in the years ahead: (1) Higher energy costs are driving capital into the development of alternative energy forms; (2) The transition to sustainable energy will drive investment capital into alternative forms of energy, including hydrogen fuel cells; (3) As hydrogen fuel cells gain massive adoption hydrogen power will become more cost-competitive.
My strategy with PLUG is to accumulate shares in my brokerage and retirement accounts up to a certain defined percentage. I can only ever lose 100% of that defined percentage of my portfolio if I am wrong, but if my analysis is right, the gains may reach as much as 8,000% over the course of years. I know most people on here trade on much shorter timeframes than years, but my opinion is that the greatest wealth-building occurs by staying invested over the long term.
Below are some interesting comparable charts. PLUG's current chart looks similar to Monster's chart in 2000 and AMD's chart in 2018.
What's remarkable about these charts is how little of an effect even recessions had on the stocks' price movements. In the case of Monster, its price remained generally flat, despite the S&P 500 experiencing major declines during the early 2000s recession. In the case of AMD, one of the worst stock market crashes in history (March 2020) is barely apparent on its chart. This lends hope that even if the U.S. or global economy experiences a recession in the years ahead and the S&P 500 declines, perhaps stocks like PLUG will be less affected.
To learn more about hydrogen energy including its advantages and disadvantages, you can check out this video from Bloomberg Quicktake:
www.youtube.com
As always, trade at your own risk. Anything can happen and my analysis can prove completely wrong. Feel free to leave constructive thoughts in the comments below. Thank you.
Time to pull the PLUG?Plug Power - Short Term - We look to Sell at 14.94 (stop at 16.92)
The medium term bias remains bearish. A break of the recent low at 13.68 should result in a further move lower. The sequence for trading is lower lows and highs. The continuation lower in prices through support has been impressive with strong momentum and shows no signs of slowing. Preferred trade is to sell into rallies.
Our profit targets will be 8.01 and 7.50
Resistance: 13.68 / 14.96 / 18.26
Support: 12.70 / 11.90 / 10.92
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PLUG struggling after a break from IH&S.Plug Power - 30d expiry - We look to Sell at 19.18 (stop at 20.73)
Broken out of the Head and Shoulders formation to the downside.
Our short term bias remains negative.
Bespoke resistance is located at 19.00.
Preferred trade is to sell into rallies.
Daily signals are bearish.
We are trading at oversold extremes.
Our profit targets will be 15.31 and 15.01
Resistance: 16.80 / 18.25 / 19.00
Support: 14.80 / 14.33 / 12.7
Disclaimer – Saxo Bank Group.
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PLUG Plug Power Options Ahead of Earnings Looking at the PLUG Plug Power options chain ahead of earnings, i would buy the $20 strike price Calls with
2023-3-17 expiration date for about
$1.18 premium.
If the options turn out to be profitable Before the earnings release, i would sell at least 50%.
Looking forward to read your opinion about it.
$ENPH isn't the only solar stock, look at $SHLSShoals Tech Grp p is a leading provider of electrical balance of system or “EBOS” solutions for solar photovoltaic, energy storage and eMobility.
IBD ranks NASDAQ:SHLS in number 6 of its industry and has a 95 in its relative strength rating.
Looking at the company's valuations, pure fundamentalists would say it's overvalued. But, the technicals clearly signal leadership and strength relative to the market and its industry.
Although, NASDAQ:PLUG , NASDAQ:PI and NASDAQ:FLNC look very good.
Remember, price is king!
PLUG - Trend Reversal The red line demonstrates the strong downtrend line that was dominant for some time
The green vertical line displays the point at which this trend reversed
Right now a flag / falling wedge pattern is forming high above, this may breakout further as these bullish patterns do, or collapse to reestablish support for the bulls
