Volatile Young Growth Stocks and a Bull Flag Bonanza
Over the past few weeks we have been discussing how the high, tight flag pattern was poised to present the biggest opportunities in the months ahead.
Well, so far its working out for those using that strategy with great care. Here are just a few of the big moves that occurred after a high, tight flag formed and the stock broke out.
Keep in mind this is just over the past 2 weeks.
- SWAV broke out of a high, tight flag yesterday, a day where there are supposed to be smaller moves, and the stock then surged 12% in 3 hours. Not unusual for a high, tight flag breakout. We tweeted about the stock as it was breaking out yesterday. ACB surged 5% and both stocks held their levels while the overall market pulled back late in the day on a Friday.
- SNAP surged 8% within 24 hours from the breakout point.
- NVTA soared 20% within a week.
- BPTH formed a high, tight flag on a shorter, more risky time-frame multiple times over the past couple weeks and more than doubled from the technical entry point.
- GH skyrocketed over 55% from the first entry point taught in the high, tight flag course on Monday.
There are a few more not listed above. Its been a high, tight flag bonanza. Those using the high, tight flag course to find the strongest consolidation patterns and breakouts are cleaning up right now.
Typical bull flag patterns talked about elsewhere are just OK trading opportunities and I typically ignore them out-of-hand for a pure technical trading opportunity. Meanwhile, high, tight flags always get my attention.
After the market averages start to get back above key moving averages and stocks have been tested with some negative headlines, this chart pattern tends to offer some of the biggest opportunities for technical traders. Right now we are seeing more high, tight flags setting up than we have in a long time.
Some traders get concerned when they see a stock double or more in price within a couple months to form a high, tight flag. They think that a stock will have to turn over soon if it goes up that much so quickly.
This misconception is born of traders who focus on penny stocks and risky stocks under $9 because those stocks seldom hold their values. Meanwhile, top biotech prospects and great young growth stocks over $20 that break out of this pattern tend to hold these levels much better. The long-term trend is one of the keys to success.
Now don’t get me wrong. I don’t trade this very bullish momentum pattern without a very clear trading plan and a very tight stop-loss. Also, only about 1 in 5 of the high, tight flag breakouts will meet my strict criteria given in the high, tight flag course.
Usually I am in and out of this trade more quickly than most of my other swing trades. Generally, the biggest moves are made within the first few days.
I am seldom in the trade for more than a couple weeks. The course goes over how we identify and exit the ones with the biggest upside potential for a longer hold. Many high, tight flag breakouts lead to moves of 100% to 500% or more such as TLRY last year.
The high, tight flag breakouts that do NOT meet the course rules have a success rate of around 50/50 when using a tight stop with an occasional big winner.
In our back-testing, the ones that DO meet the criteria (price range, volume and several other key rules) raises this to near 90% with a tight 4% stop with the average profit about 3 times that. Nearly half go up 20% or more in about 2 weeks while using a tight stop when using the course rules. Contrast this with only about half being profitable while ignoring the rules.
Pull up a compound interest calculator and see what 7% interest does over 50 years for a small account. Now imagine making that in 50 trades versus 50 years with the same compounding affect. Each trade averages less than 4 days using our high, tight flag strategy.
Yep, it has pretty exciting potential during a bull market. Of course there is no guarantees in the stock market but I will definitely be trading these in the months ahead as long as market conditions continue to be good enough for the strategy as specified in the course.
Its also a great strategy to use on recent IPOS such as SWAV. Often times an earnings eruptions trade on a stock trading for less than 1.5 years is too volatile for that strategy right after an earnings release. However, our high tight flag strategy often works great on recent IPOS within the first few months they go live but I only trade them during a high, tight flag breakout that meets key rules in my strategy.