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Written and copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved.
Blog Posting: March 7, 2008, Jo-Ann Stores
The chart shows Jo-Ann stores on the daily scale. From the low of 9.03 on January 16, price climbed to a high of 17.34 on February 14, a rise of 92%. I allow rises of over
90% in less than 2 months to qualify as high and tight flags. The theory says that price will pause for a few days or weeks and then continue higher for
an average rise of 69% before the trend reverses.
I show this one as an example of what happens to many HTFs. Price does not close above the top of the pattern (shown as the red line) but tumbles
instead. That is why I suggest waiting
for a close above the highest high in the flag -- flagpole combination instead of just waiting for price to close above the flag’s trendline (think of a congestion region with
the top of it sloping down, following a trendline. In a flag, a close above the trendline would normally signal a buy).
For an example of a high and tight flag that worked, see Stillwater Mining company (SWC). The HTF appears as a small congestion region from February
11 to 14 after a flagpole
climb from 7.42 to 15.42, or 108% in about 3 weeks. Price then continued up to a high of 22.72, two days ago, for an additional climb of 47% from the flagpole high. It has dropped
since then (closing today, March 6, at 18.37).
Aftermath
Price did, in fact, continue lower, just as the blog entry suggested. The drop reinforces the need to wait for price to close above the top of the chart pattern before taking
a position.
-- Thomas Bulkowski
Copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved. Signs you have a drinking problem: The glass keeps missing your mouth!
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