AZO formed a textbook bullish flag pattern in 2001. The stock was in a steady uptrend when it popped up on strong volume. It then traded into a 3+ week bullish flag on lighter volume before busting out on a huge volume surge. This is the exact sequence of events you want with a bullish flag pattern.

BYD is an example of a stock that broke out of a large basing period and then needed to rest in a bullish flag before continuing its move up. In this situation you would use the move into the pattern to measure the expected move out of the pattern, but the massive volume that accompanied the breakout tells you there are a lot of buyers, and you can expect to get a bigger move.

CREAF is another example of a stock that broke out of large basing period, moved up and traded into a bullish flag, and then busted out again. The move into the pattern (from approx. 4 to 8.5) predicted a move to 12.5 when the stock broke out at 8. Not bad, but price targets are only guidelines and should never be blindly adhered to. Sometimes stocks come up short while other times they blow right through them.

This is not what we would consider an easy trade. Certainly the chart posted here look easy and obvious to play, but notice how the stock basically giggled in place for a few weeks before busting out. It took a high volume gap up to break out of the pattern, and only an active and patient trader would have gotten in the trade.

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