As we honor those who served in the military this Memorial Day, it seems appropriate to focus on the bull flag pattern. Flag patterns are a byproduct of positive momentum and tend to appear in environments characterized by sharp increases, such as the current one. As shown in the chart of privacy coin Zcash, the flag pattern is essentially a sharp rally followed by a sideways consolidation phase. The first close price outside the consolidation phase will trigger a position to be taken. On a daily chart, a flag breakout has a short-term bullish effect that can last for days or weeks. Flag breakouts tend to foster further upward momentum, often resulting in an advance that mirrors a “flagpole.” Ideally, a breakout is supported by above-average volume. Zcash’s April-May breakout shows why it’s important to act quickly when taking positions. We find that some stocks, often in the technology sector, are particularly prone to flag patterns. As an example, Dell Technologies has seen a series of flag breakouts as it has been on an uptrend. The uptrend has been repeatedly renewed during the consolidation phase, suggesting that traders should welcome a period of recovery after the rally. It is easiest to find examples of flag patterns among semiconductor stocks, which have been the main source of bull markets. The recent flag breakout by Arm Holdings is a great example of how a cautious move can be achieved in just three days, and how explosive the resulting rally can be. The measured movement prediction is derived from the “flagpole” and is projected higher from the lowest point of the integrated pattern. The search for a new breakout in the semiconductor sector brings us to Lam Research, which emerged from the digester stage late last week. If it is indeed a flag pattern, LRCX should rise in the very short term, similar to the April 29-May 6 rally that led to a 23% surge. Flags are continuation patterns that tend to perform best within strong uptrends. Of course, top-down influences contribute to success rates. Although the current environment is conducive to flag patterns, conditions can change quickly and we will be cautious if flag breakouts stop working. —Katie Stockton with Will Tamplin Get free access to Fairlead Strategies research here. Disclosure: None. All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. 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