My big family slept at my home over the weekend. It felt like there was a party!
Popcorn, snacks, drinks, and sunshades. Here's why.
They came to watch a rare natural phenomenon. Experts predicted that a solar eclipse would happen on the following Monday.
Everyone was eager about the once-in-a-lifetime event. The last eclipse occurred in 1918.
So, the day came, and we put on our shades to witness the arrival of a solar eclipse.
Except something else interrupted our experience.
Mosquitos that only come out at night started appearing. I guess it was their feeding time.
Many of us were at their mercy because we didn't apply insect repellent!
Haha..what a moment to remember.
Like an eclipse, the next chart pattern is also unique.
We call it ‘High Tight Flag' or HTF in short.
Although it’s rare to spot one, it can pack serious profits!
HIGH TIGHT FLAG
An HTF looks like a pole with a flag.
If a stock has this chart pattern, there’s a big chance that it'll be a winning buy. That means it can make incredible gains (like more than 100%) in several weeks.
The profits will be if the stock that forms an HTF pattern has solid balance sheets aka fundamentals.
Some claimed that stocks with HTF are a risky play. Here’s why.
HTF is common in small cap stocks. Changes in a company's management or products can lead to the formation of HTF. It made the market scramble to review the stock's value. And it’ll cause the price to be volatile.
Many think that you’ve missed a golden opportunity when a stock leaped to significant gains in the blink of an eye.
If you decide to own that extended stock, people will think you’re a fool for placing your money at stake. They figured that this rare pattern is too good to be true. So the same people will ask you to stay away from it.
But they didn’t realize that HTF obeys Newton’s First Law.
An object in motion will continue to in that direction unless an opposing force acts against it.
In other words, a stock that reached new high will continue to climb higher.
So, remember this. There’s always a chance for further uptrend after a strong initial move.
HOW DOES HIGH TIGHT FLAG BEHAVE?
Let’s break the HTF’s formation into two phases.
Phase One. The stock must gain at least 100% in eight weeks or less. The reason is to form the steep pole to ‘hang your flag.'
Phase Two. The price pulls back and consolidates for less than five weeks to create the flag-shaped base. Also, the volume must dry up. It indicates that no institutional investors are keen in the stock.
Here’s one quick tip. Use a weekly chart to analyze the action as a daily chart will display volatile price movement. You’re unable to visualize the latter well.
WHY HIGH TIGHT FLAG?
Who wouldn’t own a stock that displays HTF pattern? One that you seldom see in the course of an entire bull market.
This vertical pattern dispels the old myth where the ideal strategy is to ‘buy low and sell high.’
Instead, an HTF stock forces you to ‘buy high and sell higher.’
You’re joining a throng of hungry investors who are impatient to press ahead in that stock.
It has an excellent track record as a set-up for even greater gains. It's typical for a stock price to double or more from an HTF. On weekly charts, it may show up as a stepping stone for a huge advance.
WHEN TO BUY & SELL?
There are many options to play this.
One strategy is to buy at the breakout from an imaginary resistance line. And the volume must be higher than the average volume. It indicates that big players like mutual funds are also snapping up the shares.
So, when do you sell?
One way is to sell the shares as soon as the breakout fails. It moves lower than the initial buy point. Cut your loss fast so that you can stay in this trading game longer.
Another scenario is to sell when the stock run-up has reached your preset target profit, i.e., 5%, 10%, 15%, 200%, etc.
HTF is often related to innovative companies with new products that can change the world.
Although it’s one of the consistent patterns in the market, you must remember this.
Trading HTF pattern isn’t foolproof. Like any pattern, it’s subject to different interpretations of how it can be applied. Even so, I assure you that it can produce excellent results in short time.