Page 249 - How to Make Money in Stocks Trilogy

How to Read Charts Like a Pro and Improve Your Selection and Timing 131

High, Tight Flags Are Rare
A “high, tight flag” price pattern is rare, occurring in no more than a few
stocks during a bull market. It begins with the stock moving generally 100%
to 120% in a very short period of time (four to eight weeks). It then corrects
sideways no more than 10% to 25%, usually in three, four, or five weeks.
This is the strongest of patterns, but it’s also very risky and difficult to inter-
pret correctly. Many stocks can skyrocket 200% or more off this formation. (See
the charts for Bethlehem Steel, May 1915; American Chain & Cable, October
1935; E. L. Bruce, June 1958; Zenith, October 1958; Universal Controls,
November 1958; Certain-teed, January 1961; Syntex, July 1963; Rollins, July
1964; Simmonds Precision, November 1965; Accustaff, January 1995; Emulex,
October 1999; JDS Uniphase, October 1999; Qualcomm, December 1999;
Taser International, November 2003; and Google, September 2004. Each ear-
lier pattern serves as a precedent for each later pattern, so study them carefully.

Price
Bethlehem Steel 600
500
Weekly Chart 400
340
300
260
Buy point
Buy
Bethlehem Steel sem Sh
B Bethlehem Steel serrves as a precedent ves as a precedent deas a v Buy pointtpointiy 220
for American Chain & Cable in 1935 American Chain & Cable in 193551& CaaricanAo
for 190
a and everygyy high tight flag aygy hi g g i flag gg g fter thathe 160
140
Flagpole
Flagpolea 120
igh tightgh tighttgh tg
Hi
Higig t t t 100
fla fla
flagg g g
80
70
60
45
38
Volume © 2009 Investor’s Business Daily, Inc.
No trading duringng duringo tratrading during 30,000
No
W W Worlddorld WWWar Iar I 14,000
6,000
2,000
Jun 1914 Sep 1914 Dec 1914 Mar 1915 Jun 1915 Sep 1915 Dec 1915
Price
American Chain & Cable 80
Weekly Chart 70
60
50
40
34
yppo
Buy pointuyuy po oint 30
yp
26
3 weeks tightheks t
3 weeks tigh
22
19
A
American Chain & Cable now Chain & Cable nowe& Can Ch
American 16
H H H H High tightgh tig g t givess youyouu aa secondsecondos p precedentc 14
precedent
gives
g
f flag g
for
for EL BEL BEo r ruce in 1958uce in 19581958e 12
V Volume on new higholume on new highhignume h h 10
breakout up from makou
p prior week’s volumeweek’s volumelumesr we
prior 8
Volume © 2009 Investor’s Business Daily, Inc.
15,600
9,400
5,600
3,400
2,000
Sep 1935 Dec 1935 Mar 1936 Jun 1936 Sep 1936 Dec 1936