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Chart of the Day: Bear Flag in EL

The daily chart of Estee Lauder Companies Inc (NYSE: EL) shows a clear bear flag, which sets up a potential trade on any breakdown. Note that this is only a setup, and still requires an entry trigger. In this case, shorts could be initiated under the previous day’s low, with a stop perhaps in the 56.00 – 58.00 range. This is an example of a simple pullback, one of the patterns explored in detail in my new book, The Art & Science of Technical Analysis. Entering a trade like this is relatively easy, but exits and trade management are even more important. In this case, beware of a weekly close back above 52.00 which could set a bear trade (or failure test) on the weekly chart.

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.