Flags High and Tight

Performance rank Break-even failure rate Average rise Change after trend ends Volume trend Throwbacks Percentage meeting price target Surprising findings A consolidation region of several days to several weeks long after a stock doubles in price The pattern sports a huge average rise with small failures. Throwbacks hurt performance. Short or narrow patterns perform better than tall or wide ones. The price trend after the flag is about half as far as the trend leading to the flag. Patterns with...

Identification Guidelines

The phrase, high, tight flag, is a misnomer as the formation usually does not resemble a flag formation at all. Sometimes prices move up slightly as the flag progresses, such as shown in Figure 22.1, but more often prices spike down briefly a day or two , then return and move downward or horizontally before breaking out and heading up. The formation was popularized by William J. O'Neil in his book, How to Make Money in Stocks McGraw-Hill, 1988 . In his introduction to the formation, he...

Statistics

The tables in this section differ from those given in other chapters because of the uniqueness of this chart pattern. Many of the statistics provided elsewhere do not apply because there is no breakout and no ultimate low or high. Table 33.2 shows general statistics for MMUs. Number of formations. I found 810 MMUs in the stocks I looked at. Since the pattern was so plentiful, I did not search all of the stocks in my database. Instead, I used 500 stocks from mid-1991 to mid-1996 and another 200...

Table

Arithmetic scale Do not use a semilogarithmic scale instead us an arithmetic one. Rising trend line A trend line connecting the lows rises steadily no horizontal or near-horizontal trend lines. The trend line usually rises at about 30-45 degrees although this varies with scaling . Avoid trend lines that are too steep over 60 degrees There is not enough room for the bump. Lead-in, lead-in height The lead-in is the section just before prices move up sharply in the bump phase. Lead-in prices...

Stock Performance from 1991 to 2004

Before reading about the various chart patterns in this book, it is wise to review the performance of the stock market during the period. Figure I.1 shows a monthly price chart of the Standard amp Poor's 500 stock index. Beginning in mid-1991, you can see that the market moved up at a leisurely pace, pausing during much of 1994, and then resuming the climb at a steeper angle in 1995. The index stumbled in August 1998 and made lower lows for 2 more months before continuing upward, peaking in...

Broadening Wedges Ascending

Performance rank Break-even failure rate Average rise Change after trend ends Volume trend Throwbacks Percentage meeting price target Surprising findings Prices follow two up-sloping trend lines that broaden out. Breakout is upward. 6 out of 23 2 38 -31 Upward 50 69 Throwbacks hurt performance. Patterns with heavy breakout volume perform better. Same, but breakout is downward. Short-term bearish reversal Performance rank Break-even failure rate Average decline Change after trend ends Volume...

Preface to the First Edition

When I was a little tyke I decided the easiest way to riches was to play the stock market. It was, after all, a level playing field, a negative-sum game with somebody winning and somebody losing. Hint The winner is always the broker. All one had to do to win was pick stocks that went up and avoid stocks that went down. Easy. I kept this in mind when I graduated from Syracuse University with an engineering degree and showed up early for my first professional job. Each morning I cracked open the...