Hello and welcome to Getting Started with Technical Analysis, another great webcast from Schwab Coaching. My name is Ben Watson, I'm an education coach and senior manager here at Charles Schwab. And I'm joined out there in the chat by my good friend Scott Thompson, who is a phenomenal educator in his own right, a 20-plus year veteran of the financial markets. He's there to help answer your questions. So, since this is Getting Started with Technical Analysis and this is Lesson Five in a nine-lesson rotation, we're going to be talking about flag patterns today, the start of a semi kind of small segment of this rotation focusing. on price patterns what we've learned up to this point, we've learned about trend, we've learned about support and resistance, we've learned about candlestick patterns, we've learned about how some of those things come together to understand the moves that stock prices make.
Now we're going to put that kind of all together into a big mashup. We're going to see how support and resistance and trend come together, how those trends get created. And we're going to do it through the magic of flag patterns. They're not magic; they're just support. And so let's take a look here really quickly; a couple of quick housekeeping items. Remember that everything we talk about simply for illustrative and educational purposes only. It is not any kind of advice or recommendation about a particular pattern, a particular security, or particular strategy. Now, normally we don't talk about options in this particular webcast. However, today, because we're also going to talk about bear flags, we may bring into the discussion the idea of using a put option to trade a bearish or downward trending stock on the function of a bear flag pattern.
So remember, options carry a high level of They're not suitable for all investors. Make sure that you're aware of the characteristics. and risks of standardized options before considering any option strategy. We'll talk about that in more detail as we get into that particular segment of this discussion today. All of the specific symbols that we will look at, however, are again simply for demonstration purposes only. Now, this is all about technical analysis. It's getting started with technical analysis. Technical analysis is not the only way to look at the market; it's simply one way. There are others. They are all theoretical in None of them are guarantees as to what's going to happen in the future, but Schwab doesn't recommend the use of technical analysis.
As the sole means of investment research, we're going to be using the thinkorswim desktop software platform today, specifically the paper money version of that platform. And that's a great learning environment. It is not a guarantee of future success out there in the real world. Sure, that you are always keeping in mind the idea that investing involves risk, including the loss of principal. There's no guarantee of future performance based on past performance. So keep all of that in mind as we jump into this discussion today. And as we get into the next segment of this, let's talk a little bit about where we are in this progression. We talked again about that technical analysis idea: trends and moving averages, support and resistance, candlesticks. Here we are right now on lesson five: price patterns.
Now, when we talk next week, we're going to be talking a little bit about pendants and triangle patterns. And then, we're going to be talking about channels and reversal patterns, and kind of wrapping things up into lesson eight and nine. So, for those of you that are joining me for all of these lessons, great! If you're here in the recorded version, you can go back and you can find previously recorded versions of all of these lessons. If you're here live with us, well. this is what we're focusing on today. We would encourage all of you to participate in the conversation by participating in the chat. That's why Scott's here. Or, if you are watching the recorded version, go ahead and leave a comment in the comment section.
We will get to that as quickly as we can. So let's talk a little bit about where we are. We're going to talk about what price patterns are, what creates price patterns, going to explore a bunch of examples of specifically flag patterns. And we're going to talk about those on the chart and perhaps put some illustrative trade examples to those as well. Let's talk a little bit about Here really quickly, what price patterns are. Price patterns are a way that price moves on the chart that is recognizable. I mean, obviously that's the idea behind it. They occur because levels of support and resistance exist at horizontal and diagonal levels. And those levels of support and resistance create common shapes like rectangles, triangles, and wedges. Oh my. So we're going to put these ideas together.
These patterns have a construction that forms over a period of That construction gives us some expectations, but not guarantees, of how long it may take for the price to move to a particular level where that price. might find the next level of support or resistance and some framework around which we can make decisions. When can we enter the? When should we exit the? Those types of things. So it fits very nicely in the concept of technical analysis. So we'll talk a little bit about timeframe, the signal that we get, the targets that those price patterns give us. Again, today our focus is on bull flags and bear flags. So let's start with a bull flag, one that probably many, I can't say most because I don't know most traders, but many traders have either heard about or are familiar with, or will recognize kind of intuitively as the pattern of stock price.
movement when it is in a trend. Because if you remember, a couple of weeks ago when we talked about and trend creation, we talked about the elements of an uptrend: higher highs and higher lows. We talked about the elements of a downtrend being lower highs and lower lows. And so, during those periods of time when a market, an instrument, a stock, a futures contract, whatever it might be, when it is trending in a direction, typically— not always, but typically— price makes a pattern of higher highs and higher lows or lower highs and lower lows. So it rallies up for a little while, it pulls back a little bit, it rallies up for a little while, it pulls. back a little bit rallies up for a little while and so on and so on.
What makes it a trend is that the pullbacks are shorter than the rallies. So the rallies are longer; they're driving the price higher. So it's this is kind of like the Paula Abdul of price trends: two steps forward, one step back. Okay, and if we're talking about a bear flag, which we will hear in just a we're talking about exactly the opposite, but it's this portion. And I'll just kind of circle this. It's this portion right here that we're focusing on for a flag pattern. Maybe, yeah, COVID times. Oh yes, I remember that one. Oh, okay, we'll perhaps get to that one. Okay, now that being said here's the here's the uh the the focus that we are putting that on.
So there are some elements to the anatomy of this particular pattern that I want to bring into this discussion. And we'll just kind of label these portions of the flag pattern really quickly. This portion right here that I'm pointing out with my cursor, that is what we refer to as the flagpole, the idea being that that flagpole gives us a distance measuring objective. It's the move that then constitutes the And then the flag portion is this portion right here that's outlined in red. So flagpole and then the flag is the pullback, then the extension of that pattern. That part right there is the the move to the target. So it almost looks as if the flag is kind of flying at half staff, if you will.
If you were to consider that this distance, the flagpole, and then the extension to the target, those are going to be roughly equidistant. Then it would look as if the flag is flying at half staff. And that's kind of the way we look at it from a visual perspective. If you were to think about it this way, I'll put this into the orientation instead of diagonal. So if this is our flagpole and the flag occurs right here, the rest of that distance to the flag target would be the top portion of the flagpole. And here is our flag right here whatever that flag might be flying at half-staff. If we tip that on its side and we move the flag, the top portion of the flagpole to right here, to the outer edge or the left edge of the flag, then that's what it would look like to give us that representation.
That's the reason it's called a And these are very common. So let's talk a little bit about why, for just a minute, before we get deeper into this and we look at an example. Let's talk about why these flag patterns get created. So we've talked quite a bit at various lengths about institutional traders versus retail traders, institutional traders being those traders. that are generally trading on behalf of someone else's money center banks, investment banks, hedge funds, mutual insurance companies, college pension plans, those types of things. Uh, those entities are trading for somebody else. We, us retail traders, and as retail traders, we're trading on our own behalf. We don't necessarily move nearly as much money, even collectively, as institutional traders do.
So institutional traders, when they step in and they start buying shares of something, they start moving the price of that something— whatever it is, that stock or ETF or futures contract or whatever it is— they start moving. that price because when you get more buying pressure or more selling pressure, it adjusts or impacts the price. That's called market impact. And so institutional traders don't like to see market impact. So what they will do is they will buy, buy, buy and then let it sit, and then buy, buy, buy and then let it sit, and come back a little bit more and they'll start buying more and then buy, buy. It's almost as if they're in a boy band, buy, buy. And then they let it settle back down a little bit.
That's the process. Now, it's not always three days. It's not, it's not a specified number of days or specified distance. It is simply when they feel that buying. Pressure is being reacted to more so than it was before. They will let that price settle back a little bit. Now, there might be percentages that they keep in mind, percentages away from a moving average or for something like an indicator like volume weighted average price or something else, but that's the driving force: institutional traders buying. If this was a bull flag, buy, buy, buy! Then let the price settle down, buy, buy, buy! Let the price settle back down. So that's kind of what creates this. Yes, that would be in sync. Thank you, Scott, for keeping me on track in terms of the boy bands.
All right, teeny bopper music was Paula Abdul, teeny. bopper music I guess I guess she yeah I'm that old. So Scott, but you know anyway let's jump back into this discussion here. Now that we've got that moving, let's take the other side of this equation and let's kind of think about this in terms of the bear flag. So thinking again about this process, same type of construction: flagpole, flag trending down, it's just simply lower highs and lower lows. And so now the boy band is a little bit different. Sell, sell, sell, let it settle back a little bit or a little come back up again. Sell, sell, sell, let the price come back up again, right? Sell, sell. And exactly. So Sanjay, that's exactly what we're talking.
about here is this bearish side of the. This would be a bear flag. So we've got bull flags, we've got bear flags, and it gives us an opportunity to trade both of them. So one thing that we want to think about then in terms of this pattern, and I'll just line this out, and then we'll look at a specific example, is whether we're talking about a bull flag or a bear flag, there is one kind of constant element that we think about um when uh trading flag patterns. And that is that this flagpole portion, that portion right there, whatever that distance might be. Let's say that distance is 10 points; then oftentimes the second portion, that distance. is also going to be 10 points.
And if it took, let's say, it took two weeks, let's say two weeks for that flagpole to be created, that it may take two weeks for that target to be hit. There is some symmetry to that, so when there is that symmetry, that gives us some planning capability. By no means is it any kind of a guarantee, right? There is, uh, no guarantee that the price of that stock is going to move in that fashion, nor over that length of time. But the reason that we see these price patterns being something that is important to talk about is that they do tend to reoccur, not always, and they don't bring us something to perhaps use to frame our decision making process I want to go back to, uh, to the question that Myron asks: why does price drop when they let it sit?
When institutions stop buying, why does price come back down? Because when those institutions stop buying, that momentum slows. Other investors might say, this is an opportunity for me to sell and take a profit and bring that price back down. That's number one. Number two, the other thing is the institutions might push the price up and then sell a little bit into that strength at that high price, let the price come back down so that they can buy more at a lower price. That's again another one of the things that institutions. may do not manipulation. It's not nefarious. They are just working the price to their advantage. All right, so let's do this. Let's pop out here to the thinkorswim desktop software platform.
And I happen to have an example of a pattern, a stock that is showing a couple of different, uh, flag patterns. So this is RTX. This is, uh, Raytheon, and Raytheon's in the defense sector, uh, or the defense industry within the industrial sector. And I just happened to notice a couple of different flags going on in this particular chart. I will draw them with my magic marker first, and then I'm going to draw them with the line tool on the thinkorswim platform. and you notice there'll be some common elements to these. So I'm going to draw from down here where I see the price moving up to a high, and then pulling back, and then it starts to move up again. And then guess what? It moves up, it pulls back, it moves up again.
Now here's where we are kind of in that same progression right now. We're kind of at a point where price has moved up and is pulling back into a support level. So we are kind of at that cusp of the next leg of the flag pattern. So what I'm going to do first is I want to kind of draw. I'm going to take this low right here. Now here's something I'm going to tell you about drawing flag patterns. Not too particular not too precise. Don't get hung up on the absolute length of the flag pattern or where you draw that flag pattern from or to; it's just not that precise because we don't draw levels of support and resistance with bright lines on the chart.
We draw that with fat magic markers, and if that's the case, we don't want to be that precise. Now notice I drew that up, I duplicated it, it got to that target a little bit. It missed a little bit of that price move to the upside. Now if we duplicate this distance one more time, let's go to that one. Let's draw from here to here, and we'll take that level and we'll duplicate it, and we'll put it. over here as this starts to bounce, that one got a little bit closer, so that one got a little bit closer to where that expected target was. Now that we start to see those, we can see well we had a nice flag pattern that moved about two thirds of the way, maybe three quarters of the way to its target.
Then it pulled back and then it created another flag pattern that got all the way to the. Now if we take some of these off, let's just remove some of these drawings out of here and let's use this next level as we're starting to see this happening. Let's see if we can measure where this pattern might move to. If that's our low that created the flagpole. now, to be fair, we could draw the flagpole to that low right there; that would be a long flagpole. We could draw the flagpole to this low right here; that's created a level of support. We could even conceivably draw the flagpole to perhaps right even back in here into this range as the bottom of the flagpole. All three of those levels would be perfectly acceptable levels to start our flagpole from.
We can use, as Scott is pointing out in here, estimates. Absolutely, they can help identifying flagpole targets or price targets. There's nothing magical about Fibonacci's; they're simply rulers graduated in Fibonacci ratios, but they can. be very helpful in assessing those flag targets. That's an extensive flagpole; that's a mid flagpole. This is maybe a little bit of a short flagpole, and we expect generally that the pullback is going to take, if it's a daily chart, somewhere between two to five days' worth of trading to pull back, letting that price settle back. Could it take a little bit? Yes. Could that entire pullback take one or two days? Yes, absolutely. So there's that idea. And I like what Scott's saying, right? So find what targeting rules, what flag pattern rules work best for you.
This is one of those things that is helpful to practice in paper money identifying. drawing targeting flag patterns. So what we're going to do is I'm actually going to kind of detune this flagpole a little bit. So I'm going to take this line off, remove drawing. I'm going to go to this support level right here that I drew in, right around 144, and I'm going to use that as my flagpole. And I'm going to come back here. Now, one thing I wanted you to notice, this happens to incorporate an earnings announcement in the mix. We don't always get earnings announcements. So if your flagpole is dependent on the length of that earnings announcement move and you don't have another earnings announcement coming up, you might not.
necessarily expect that the next move higher is going to move as far as it did on earnings. So just kind of keep that in mind that earnings can definitely be a in this movement. So what I'm going to do is I'm going to take that line that we drew there, I'm going to duplicate it using the thinkorswim platform, and I'm going to put it right down here on the bottom. Do I know that this is the absolute low of this pullback? I do not yet for sure, but it seems to have created a level of support here back around the 154 mark. Now if I zoom back out on this chart and I kind of squish my right hand side down a little bit, I'm actually going to add a little bit of time to the right hand side of the chart by going to the gear icon, and I'm going to add 30 days to go into the future.
That puts my price target for this pattern right up here around 168 or so. Now let's talk about what we're looking at to confirm this move, to confirm this kind of entry into this pattern. And we've talked a little bit about it before; you've probably heard it in other webcasts. I know this is something that Scott talks about quite a bit in his beginning stock trading webcast. And that is this idea of what gives us confidence, or what gives us evidence that price has made a move in a particular direction. And so it's taking out a previous high in the context of this pattern. Now I might do it a little bit differently than Scott does it; Scott might do it a little bit differently than James Boyd does it, who does it a little bit differently than Kevin Horner does it, than Barb does it, than Connie does it, than Cameron or Mike does it.
I want to talk about it in this context. What I'm seeing in terms of the confirmation of the bounce and the breakout of the flag would be a price closing or trading above the high of this day right here that creates the in that pullback. So this candle, like we talked about those candles last week, this candle stick right here gives me that low. That low gives me a point at which now maybe there's some support. The high of this candle, which if I look up here on the top left on this line right here, the high of that candle is at 155. 76. So what I'm looking for now is in this for either a closing price or a trading price above the high of that low day.
That's evidence to me that price is in fact moving in the direction that I want it to go. Doesn't guarantee that it's going to go to this target, and it doesn't guarantee that it's not going to turn around and go down tomorrow. What it does tell me is that in the near term, in this snapshot right now, that's all we're looking. At its prices moving above an area where it has previously stopped. So if 155, but put my cursor there, 155. 76 is the high of that previous day. I might go to something like 156 as that breakout evidence. So if we were going to put a trade together in this particular case, yeah, totally noodle, you've got it. It was the low. That's why I identified where that low was.
You've got it. So what I'm going to do is I'm going to right here, and I'm going to say, all right, let's buy, but I'm just not going to just buy at a market order, the next available price. I'm going to edit this order, and I'm going to say, hey, buy stop. Stop, wait until this price. gets to 156 or higher. So I'm going to say, hey, you know what? Let's do a buy stop here at 156. Scott talks a lot about this, and I'll tell you what, Scott, if you have not checked out Scott's webcast, please do. And Scott's done a short video as well that helps to identify this as well. So 156 is going to be our bounce entry trigger to get into this trade.
And I'm going to click on confirm and send. I'm going to read through this order, make sure that this is what I want it to do: buy a hundred shares of RTX at 156 limit. So don't do anything until it gets to 156 and then buy that. Oh wait, you know what? I just noticed by reading that, guess what? You know what? I need to do I need to edit this order because I need to change this from a limit to a stop. That would just go ahead and fill that order right now. I did that this morning in the futures webcast. I don't want to do that again. So I'm going to read this order, Scott Thompson, Scott Thompson right there out there in the chat.
So buy this stock at 156 only when the price of the stock has broken up above that 156. So we're going to click on confirm and send, read through that order, make sure that's what we want, and then we'll go ahead and we'll send that order out. Now the other thing that I could do with this flag pattern in this context is if this now is low. I could use that as a means to set a stop. So I could set a stop on this order some level below that. And I could set a target up here at that price target from the price pattern. Let's go ahead and do that really quickly. I'm going to cancel that order, and we'll make a new order, and I'll right-click, and we'll do a buy custom with OCO bracket.
So now my buy custom with OCO bracket says, all right, let's get into the trade at 156, and we'll make that a buy stop. Remember, a stop is not a guarantee of what price that order will get filled. Now if that order does fill, however, I want that to take that order off if the price of the order is 165. So we're Going to sell it if it goes to 168. So for a swing trader, this type of setup is a setup that makes sense because you're trading from one level of support to a level of resistance. Then I'm going to put my stop somewhere below that low of the low day. So I'm going to say I'm going to go down to about 152. 58 here in this case, 152.
58. Just looking at that, just in terms of numbers, 152. 58 below that level of support. I'm going to make that one good till canceled as well. And I'm going to make that a stop so that if price comes down to that level, stop, wait until price gets to 152. 58, then submit a market order sell the stock at that point because it's going. against me. So getting out quickly and letting it run to that price target potentially, if it does move in that direction. So now I'm going to go to confirm and send, and I'm going to read through this order and make sure that this is what I want it to do: Buy 100 shares of RTX with a buy stop at 156, then sell it at 168.
55 if it goes up to 168. 55, or sell it at 152. 58 if it comes down against us. And if it does either one of those, cancel the opposite side. So we've created kind of an if this then that structure, and we'll go ahead and we'll put this in our, I'm going to put this in my market movers group just so I can kind of segregate this particular trade. We'll go ahead and click on send, and we'll fire this order off. And now what we're waiting for is a move above that level, but you can kind of see how this lines itself out. That's what that order is going to look like. And visually, I can kind of see the relationship here from a risk-to-reward standpoint.
If this is my stop, that's my entry point; that's my target. I'm probably risking one to make three in this particular trade, risking one to make three in this particular case. So that's kind of the thought process. Now, could we do this with an option trade? Absolutely! You could use the bull flag as a means to enter an option trade. And that's one way that you could trade it as well. I've got a couple of other examples, though, that I want to bring into this mix. Now that we've done that, let's take a look at one that's already kind of in motion. Let's jump over here to AAPL. Some of you might be familiar with this particular type of stock and this particular stock in and of itself.
And I'm going to zoom in here. And you notice the stock had an earnings announcement here, and I think there was a news announcement somewhere along the way. This is an example sometimes of a flag pattern. Nevertheless, this is still a flag pattern, but a flag pattern that traders may run into where the stock makes a big move, runs into a resistance level, pulls back a little bit, and then rallies up through, potentially, up through that resistance level. And so, to go back to Myron's question: why does the price pull back when the buying pressure eases? Well, think about this: the stock has now made a big run, big green candle, gap up, pause, kind of big green candle, run up to resistance, pause, and there was some profit taking.
Maybe somebody that got in here or somebody that got in here said, hey, I want to get out at this point. I feel comfortable selling the stock at this point. That brings the price of the stock down. Then, there are other investors who say hey I missed out on this big move. So the next time this pulls back a little bit, I want to get into the trade. Now this has a level, if we zoom back out here, a level of resistance that's been hit before. So some traders in this type of circumstance, where the price of the stock has pulled back and it's already started to rally, and they're looking for a breakout, may use a different approach to entering a flag pattern type trade.
And that approach might not be the close above the high of the low day. That approach might be entering on a breakout of the resistance created by the high of the flagpole pattern. Because look here's our flagpole. We could take it; we could measure it from down here; we could measure it from here. Either way, I'm going to measure it. Just as I draw this, I'm going to measure the flagpole from here up to there. There's our flagpole, to right there. Our flag is just this portion right here. And now it's starting to rally back up. Now, you know what it might do? It might pull back from here and create another low, in which case we're now creating a flag.
It might go sideways from here over a couple of days, in which case we're kind of creating a flag blowing sideways in a stiff wind. But no matter what you call it, it doesn't matter. It's still a flag pattern. And so, we're going to use the breakout of this resistance level as our entry into this type of trade. But once again, we're going to use that target. Draw that line to that high. We're going to duplicate that, and we're going to bring it right back up here. We'll put it right on that low just to kind of attenuate it a little bit. We'll put it there because and then we kind of squish this down so that we can see it. We'll bring it right there.
We'll put it right on that low, and then we'll squish this down even a little bit more. There's our target up here around 254. And interestingly, if we zoom back out, funny how that 254 has been. a resistance level before. Back here, look left to confirm what you're seeing, right? So we'll create a trade here. Let's kind of zoom in once again on this range. We'll create a trade on that breakout. So, right-click, buy custom with OCO bracket. We'll make that entry 230. 61. We'll make that a stop. So, breaking above that resistance level, we'll put our price target up here at 254. 30. We'll just put 254. 30 as our target. We'll make that good till canceled. And then we'll put our stop down below this low right here, right off that support at 220.
14. You can put it, you know, whatever method you want to use; 220. 14 would be okay. And we'll make that good. till canceled as well. We'll click on confirm and send, read through the order, make sure that that's what we want it to do. I'll put it in our market movers group just so we know where it is, and I'll click on send. And there it is. Now we're risking one to maybe make two and a half in this particular case. Okay. So that would be another bull flag, another example of a bull flag. Now let's do this. Let's shift gears a little bit to the opposite side of this equation. Let's take a look at something that is giving us a bit of a bear flag, and that's Disney in this particular case.
So the characteristics of a bear flag are that price has been moving down. It rallies back up, and then it continues to move back down again. So we take a look over here on the right-hand side. Disney has done exactly that here once before. So let me grab my magic marker really quick. Well, actually, it's done it twice here if you want to think about it. It went down, rallied up, went down again, rallied up, down again, and it seems to be rallying, kind of getting a little bit steeper as it moves down. Remember, the pattern that we're looking for now is this one downward-trending stock making these bear flags or bearish flags to the downside.
So as we start to look at this, let's line out what we're looking for in this particular case If this is the top of that last rally, we're going to look at our flagpole being this portion, the flag being this move right here, and then we're looking for the move to the downside to continue that downward momentum in this particular case. Now, I don't know, again, not a recommendation, but I don't know why anybody's bearish on Disney; but that's just being me personally. So let's take a look here, really quick. That is not a recommendation; I'm just saying that you know. Anyway, let's come in here, let's draw this line. I'm going to take my line tool, I'm going to draw that down to that level of support, and I know that there's my rally.
Now could that rally be just today? Yeah. Could the rally be over a couple of days? Yes. Could it be five days? Yes. But where it is right now, we're going to kind of be this what if happens, what you know if this happens next, then we're going to continue to move this through. If this does not continue to break down, we then say, all right, where's the next point that we would enter the trade? So a couple of different places where we can enter this trade. If this is the high, this would be a close or a trade below the low of the high day. So our entry might come right here at 112. 5. It might also come if it breaks down below that support level at 111. 86.
So what? I'm going to do is I'm going to duplicate that line and I'm going to draw it in here. I'm going to put it in right off that low, and I'm going to shrink this back up again. Or actually, I'm just going to zoom back out and say where is that next target to the downside, down around 106. Was 106 a previous level of support? Yeah, it was. So look left to confirm right. Does that make sense? Yes. And then it's given back all of that rally that it made off of the lows back down here, so that's potential move. Now we can't trade this unless we can do one of two things, perhaps. We could, well, we use an option, or we could short the stock. Now shorting the stock involves.
borrowing on margin. And that's going to be, again, carry with it its own set of rules, costs, and potential challenges, and so forth. We could use a put option. So this is where, again, I got into that conversation about trading options. If you are familiar with trading options, I'm going to go quickly through this. If you are not, we've got some great resources, including our Getting Started with Options series, as well as our live and in-person webcasts and workshops where we talk about option basics as well. We're going to use a put option. We're going to use a put option to take advantage of that downward movement. So, whoops, we'll just kind of zoom back out here. We'll look for that move. Let me make this normal again. There we go!
Now you can see where that target is to the downside. So, let's zoom back in. So, what I'm going to do is I'm going to get into this trade. We're going to buy a put option. So, I'm going to go to the Trade tab for Disney, and we say, look, I'm going to give this a little bit of time to move to the downside. So, I'm going to go out here maybe to the 17 October timeframe. We're going to buy a put option; we're going to expect that the time in this discussion. I'm going to buy that 115 put, but I'm going to do it, and I'll show you how we're going to do. this I'm going to buy that put option, but I'm going to do this with a.
And that trigger is going to come at the move of this price down below that support level. So let's go back to our chart really quick. We said that our support level was, or our entry level here was at 112. 50. So we're going to go back to our trade information, and I'm going to come over here to the little gear icon. And I'm going to make this a conditional order. So I'm going to say, fine, we don't know what the price of this option is going to be. So I'm going to make that a market order. And we're going to make this order good till canceled because I don't know when this is going. to fill I don't know when that price is going to go down below that level.
I'm going to say when Disney marks at or below 112. 50. If it goes to 112. 50 or below, then buy that put option, that 115 put option, to take advantage of that potential downward movement. Else, wait. So that is the circumstance for this trade or the condition that would trigger this trade. Again, if you're not comfortable trading options, make sure that you are clearly, clearly aware of the characteristics and risks of standardized options before considering a strategy like that. Take advantage of the opportunity to learn more about trading options. So we're Going to go ahead and we're going to click on Confirm and Send. Read through this order. Make sure that this order is what we want it to do to take advantage of that downward movement.
The maximum loss on the trade: 410, at least as it sits right now. We're going to go ahead and click on Send and fire that order off. And that's going to be our option trade to trade that bear flag. Now, as we come over here, let's take a look at one last example. This is Clorox and CL. I just wanted to leave you with this one as you start to look at these perspectives. Earnings announcement drove the price of the stock down; it rallied back up a little bit, but this is the type of setup that bear flag traders, much like bull flag traders, are looking for. When price has been trending in a downward direction, it gets to a level of support; it bounces back up off of that level of support and then starts to fade a little bit.
That may be a technical way of seeing the next step in a bear flag. So a bear flag trader might look for that break below that low. So let's just kind of quickly review, and then I wanna give you some Bull flag pattern. We're looking for higher highs and higher lows about the same length of time and distance it makes those flag pulls. Bear flag trader, we're looking for lower highs and lower. lows We're looking for an entry at these levels of support just like when we are looking for a bounce on that bull flag. We're looking for entries somewhere around those areas right there. That's the kind of pattern that we're looking for. We're gonna continue to look at patterns and talk about other types.
Next week, we're gonna talk about triangles and squeeze patterns, wedge patterns. It's just simply another way to look at a So we'll see what that looks like. We'll see what those continuation patterns look like and how we can use those. So, a couple of quick resources for you to learn more. You can come over here to the Schwab Coaching website schwab com forward slash coaching and that's where you're gonna find live webcasts. You're also gonna find our in-person events. And then when you come to the Trader Talks webcast page youtube com at Trader Talks webcasts, I'm gonna ask you to do one thing, and you can do it right now too. Click on that subscribe button down at the bottom of the or when you come right here, click on subscribe.
That way you stay connected to the Trader Talks webcast resources. You get to set alerts for new content and it keeps you part of the Trader Talks webcast community. It's at no cost to you. So click on that subscribe button if you haven't done so already. Then come over here and type in the word flag and search. And now you're gonna see dozens, literally dozens, of webcasts that talk about flag patterns: flags with a different perspective, bull flag plus Fibonacci's. Barb teaches those, Connie teaches those, I've taught them, Brent Morris teaches them, Scott teaches them. Lots and lots of resources. Here's one that you might enjoy: six steps for trading flags. And you can also use them for long-term charts and short-term charts as well. So some great resources there for flag patterns.
Let's pop back over here. And again, just we talked about what price patterns. Are we talked about examples? We looked at some examples on the charts and placed some trades. My thanks to all of you. My thanks to Scott Thompson for helping out in the chat and to our great production staff for bringing this webcast to you, as well Bree and Gabe and everybody else, and our phenomenal reviewers for watching this and keeping us on the right track. Guys, thanks for joining me. Look forward to seeing you again here next week, talking about price patterns again. We're gonna talk about triangles and wedges. We'll see you then. Take care, everybody. Bye-bye.
