23

Question 1

According to Al Brooks, what is a final flag?

Answer 1

It is the last trading range or pullback in a trend before the trend reverses.

Question 2

What type of market pattern do most reversals, including final flags, involve?

Answer 2

Trading ranges.

Question 3

A pullback in a trend is also known as a _____.

Answer 3

flag

Question 4

Normally, what is the expected outcome after a pullback or flag forms in a trend?

Answer 4

The trend usually resumes instead of reverses.

Question 5

A horizontal trading range late in a bull trend after _____ or more bars is a candidate for a final flag.

Answer 5

20

Question 6

Why might a market reverse after breaking above a horizontal trading range late in a bull trend?

Answer 6

The market often discovers the price is too high and must reverse back down to the area of agreement (the trading range).

Question 7

In a tight channel, the first reversal attempt is usually _____, meaning it will likely become a flag.

Answer 7

minor

Question 8

What is an ‘II pattern’ in the context of final flags?

Answer 8

An inside bar that follows another inside bar, which can act as a small final flag before a major reversal.

Question 9

Can a final flag breakout fail to reach a new trend extreme (new high or low)?

Answer 9

Yes, a breakout can reverse from a lower high in a bull trend or a higher low in a bear trend.

Question 10

What is the primary purpose of identifying potential final flags?

Answer 10

To anticipate that a breakout might fail and lead to a reversal, allowing for quick profits and preparation for a counter-trend trade.

Question 11

What might a bull breakout above the top of a channel indicate?

Answer 11

The market might be going too far up, signaling potential exhaustion and a coming reversal.

Question 12

If a first reversal attempt fails and the trend resumes, what should traders be prepared for?

Answer 12

A second reversal attempt.

Question 13

What does it signal when a market breaks a bull trend line by moving sideways?

Answer 13

It warns that if the trend resumes to test the prior high, it might fail and reverse down.

Question 14

A horizontal flag forming just below what kind of level might lead to the final leg of a bull trend?

Answer 14

A resistance level.

Question 15

When a breakout occurs, traders should project a potential _____ target to see how the market behaves there.

Answer 15

measured move

Question 16

What pattern, also a major trend reversal, consists of three attempts to move up, with each reversing?

Answer 16

A wedge top.

Question 17

An II pattern late in a trend is often a small _____ on a smaller time frame chart.

Answer 17

triangle

Question 18

A series of buy climaxes late in a trend with little pullback increases the odds of what?

Answer 18

The end of the bull trend, with at least 10 bars and two legs of sideways to down movement.

Question 19

When does a pullback start to be considered a trading range?

Answer 19

Once it grows to about 10 or 20 bars.

Question 20

Once a pullback becomes a trading range (approx. 20 bars), what is the probability of a reversal versus a resumption?

Answer 20

The probability of a reversal becomes as high as the probability of a resumption.

Question 21

Trading ranges are said to have a _____ pull, increasing the probability that any breakout will fail.

Answer 21

magnetic

Question 22

According to Al Brooks’ rule, what percentage of trading range breakouts fail?

Answer 22

0.8

Question 23

A strong breakout of five consecutive bull bars far above a bear trend line suggests what about the next move down?

Answer 23

It suggests the next reversal down might be the final one, and the bulls could take control.

Question 24

Every bear trend ends at what?

Answer 24

Support.

Question 25

A minor reversal from a tight bear channel will probably lead to a _____ instead of an immediate bull trend.

Answer 25

trading range

Question 26

A final bear flag is more likely if it forms right above a _____ level.

Answer 26

support

Question 27

What is a series of sell climaxes indicative of?

Answer 27

An exhausted trend where bears will likely stop selling and take profits.

Question 28

What does a 'low two' or 'double top bear flag' signify in a bear trend?

Answer 28

It represents a halting of the selling, where bulls are becoming as strong as the bears.

Question 29

In a bear trend, if traders see a strong reversal attempt up followed by a second, stronger attempt from a higher low, what will they likely do?

Answer 29

They will look to buy for at least a couple of legs up.

Question 30

A reversal from a very strong selloff will likely be _____, leading to a deep pullback and a trading range.

Answer 30

minor

Question 31

Can a final flag be as small as a single bar?

Answer 31

Yes, especially after a climactic move.

Question 32

What often follows the first reversal attempt up from a tight bear channel?

Answer 32

A deep pullback, sometimes to a new, slightly lower low, as the market forms a trading range.

Question 33

Term: Moving Average Gap Bar

Answer 33

Definition: A bar with a gap between its low and the moving average, often leading to the final leg of a bear trend.

Question 34

A good-looking major trend reversal pattern has about a _____% chance of reversing into a swing or trend in the opposite direction.

Answer 34

40

Question 35

What are the two most common outcomes after a major trend reversal pattern that does not lead to a new trend?

Answer 35

The original trend resumes, or the market goes sideways into a trading range.

Question 36

When buying a reversal you believe might be minor, what should your primary goal be?

Answer 36

To take a scalp (a quick, small profit).

Question 37

When buying a major reversal, what is the better goal compared to just scalping?

Answer 37

To look for a swing profit or trend in the opposite direction.

Question 38

A reasonable place to take at least partial profits on a trade is at _____ times your initial risk.

Answer 38

two

Question 39

Why might a rally that forms a lower high be considered a bear flag?

Answer 39

Because it could be a leg within a broader bear channel, signaling a potential resumption of the downtrend.

Question 40

A rally to a lower high can be simultaneously viewed as the start of a bull trend, a leg in a trading range, and a _____.

Answer 40

bear flag

Question 41

A triangle that forms a higher low major trend reversal can also be considered a type of _____.

Answer 41

final bear flag

Question 42

What pattern can be described as having a left shoulder, a slightly lower head, and a right shoulder?

Answer 42

A head and shoulders bottom.

Question 43

A tight trading range late in a bull trend of 20+ bars is often the final bull flag, and its breakout frequently _____.

Answer 43

fails

Question 44

The biggest bull bar occurring 20 or more bars into a bull trend is likely an _____ gap rather than a measuring gap.

Answer 44

exhaustion

Question 45

What is a 'second leg trap'?

Answer 45

A final move in the direction of the trend (leg two) that quickly reverses, trapping traders who entered on the breakout.

Question 46

What psychological event causes a sharp reversal down after a buy climax?

Answer 46

Bulls who bought late give up and sell, while confident bears begin to sell aggressively.

Question 47

What is an inside bar?

Answer 47

A bar whose high is at or below the prior bar's high, and whose low is at or above the prior bar's low.

Question 48

An II pattern is a breakout mode situation with a _____% chance of a bull breakout and a _____% chance of a bear breakout.

Answer 48

50 / 50

Question 49

Can a bull flag have a bear breakout instead of a bull breakout?

Answer 49

Yes, and if it's the last flag in the trend, it's still considered the final bull flag.

Question 50

When is a gap more likely to be an exhaustion gap marking the end of a trend?

Answer 50

When it occurs after a sell climax and the trend has already gone on for 20 or more bars.

Question 51

A spike followed by a parabolic channel is a sign of what kind of trend?

Answer 51

A Spike and Channel bull trend, which is climactic.

Question 52

After a parabolic buy climax, a small, unremarkable bull flag can often be the _____ flag.

Answer 52

final

Question 53

Who is buying at the exact top of a buy climax?

Answer 53

Weak bears who are covering their shorts for a loss.

Question 54

Who is selling at the exact top of a buy climax?

Answer 54

Strong bulls taking profits and strong bears initiating short positions.

Question 55

After taking profits on a climactic move, how long will strong bulls typically wait before buying again?

Answer 55

At least 10 or 20 bars, to see if the bears can reverse the market.

Question 56

A reversal down from a very tight bull channel is more likely to be _____ and lead to a trading range rather than a bear trend.

Answer 56

minor

Question 57

What is a 'low two short' pattern?

Answer 57

A pattern with two rally attempts that fail, creating a small double top, which serves as a short signal (e.g., low one, low two).

Question 58

After a series of sell climaxes, strong bears stop selling and start _____, while strong bulls start buying.

Answer 58

taking profits

Question 59

The best-looking bear bar occurring after 20 or more bars in a downtrend increases the chances that it is an _____ sell climax.

Answer 59

exhaustive

Question 60

When buying a potential reversal with high risk, the potential _____ must be far greater than the risk.

Answer 60

reward

Question 61

As a trade becomes higher probability, what typically happens to the stop distance and potential reward?

Answer 61

The stop is usually further away (greater risk) and you are buying later (less reward).