Channeling Stocks and Bull Flags in Today’s Market
Now that many material and industrial stocks have been take to the woodshed over the past couple years, we are seeing a lot more very bullish chart patterns. A couple in particular that I want to share with you.
Probably the most exciting of these is the bull flag pattern. Simply because this pattern often leads to gains of 20%, 50% or 100% or more within a few days to a few months.
Over a year ago we sent a message to our audience with the headline – “$1.50 at the pump?”. A lot of people scoffed at this at the time – not realizing the ability of many companies to quickly reduce costs and keep drilling for oil despite having to use fracking technology.
But we were looking at both the technicals and fundamentals and seeing that oil could go into the $20s. In fact, this was nearly a perfect 1 to 1 projection of the first move down from the highs the prior summer.
In early January of 2016 when the writing was on the wall for most traders and investors, oil plummeted to the high $20s. Putting many oil companies in jeopardy.
When oil hit $26 and change we said that was likely the bottom for now in our newsletter and the long-term trend would change to the upside.
Now the small oil companies that survive could be looking at a windfall as demand continues to grow and starts to overcome daily supply generated. This caused the best positioned small oil companies to jump into some of the strongest bull flag patterns. Along with steel companies, miners, and early cycle stocks.
While more risky, these stocks quickly jumped 100% to 200% or more and formed bull flag patterns in many cases. And took off after breaking out.
But another type of trading setup is coming up more and more. Channeling stocks. So watch for these patterns to develop as they are a less risky yet very profitable in many cases. This pattern often develops after stocks sell off and bottom.
Very few stocks would be considered good channeling stocks. But we find many throughout the year – but only the ones with the fundamental momentum to truly support the higher prices.
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