Disclosure: On Tuesday I entered a large deep near date out-of-the-money OTM long strangle position in FIRE .
*Large gains for the long strangle option strategy is attainable when the underlying stock price makes a very strong move either upwards or downwards at expiration.
Here is more information about F&P patterns
High and tight flags are the best performing chart pattern in both bull and bear markets. Even though the break even failure rate is 0%, this pattern does fail. Don't count on making a 69% average rise either. That's an average of hundreds of perfectly traded trades, something no one can do.
Measure rule: Compute the height from the start of the price swing (point A in the measure rule figure to the right) to the end of the price swing (B) and then take half of it. Add it to the bottom of the flag (C) to get the target (D).
Breakout: Only buy when price closes above the highest peak in the chart pattern (including the flagpole). That is point B in the Measure Rule figure to the right. Buying sooner risks price never confirming the pattern (in other words, price drops or moves horizontally for months). And yes, I know this is different than what I wrote in my book. HTFs fail too often when using a flag . Instead, place a buy stop above the highest high in the chart pattern.