As of 09/25/2020
  Indus: 27,174 +358.52 +1.3%  
  Trans: 11,270 +152.52 +1.4%  
  Utils: 808 +12.20 +1.5%  
  Nasdaq: 10,914 +241.29 +2.3%  
  S&P 500: 3,298 +51.87 +1.6%  
YTD
-4.8%  
 +3.4%  
-8.1%  
 +21.6%  
 +2.1%  
  Targets    Overview: 09/14/2020  
  Up arrow28,650 or 26,000 by 10/15/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20
As of 09/25/2020
  Indus: 27,174 +358.52 +1.3%  
  Trans: 11,270 +152.52 +1.4%  
  Utils: 808 +12.20 +1.5%  
  Nasdaq: 10,914 +241.29 +2.3%  
  S&P 500: 3,298 +51.87 +1.6%  
YTD
-4.8%  
 +3.4%  
-8.1%  
 +21.6%  
 +2.1%  
  Targets    Overview: 09/14/2020  
  Up arrow28,650 or 26,000 by 10/15/2020
  Up arrow11,750 or 10,600 by 10/01/2020
  Up arrow845 or 775 by 10/01/2020
  Up arrow11,800 or 10,400 by 10/01/2020
  Up arrow3,600 or 3,200 by 10/01/2020
CPI (updated daily): Arrows on 8/18/20

Bulkowski's Alpharma Trading Quiz

 

Released 6/29/2020.

Alpharma: Quiz

Below is a slider quiz to test your trading ability. Captions appear below the pictures for guidance, so be sure to scroll down far enough to read them.

 

1 / 6
chart pattern
What chart patterns can you find? Look for the following: wedge, 2 triangles, and a flag.
Answers are on the next slide.
2 / 6
chart pattern

Price moved from a low of 13.35 to a high of 26.22 in less than a month. Where's the flag in the high and tight flag? If the region circled in red were higher, that would qualify even though it doesn't look like a flag (appearing like a flag is not a requirement for a high and tight flag). What interested me was the rising price trend.

Question 1: Do you buy, short, or avoid trading this stock?
Question 2: If trading this one, what is the target price?
Question 3: If trading this one, what is the stop price?
The answers appear on the next slide.
3 / 6
chart pattern

Answer 1 (Do you buy?): Since price has continued to move up, buy.

Answer 2 (Target?): The rise from the trend start to the top of the flag is about 100%, take half of this and that's what you can expect (more of a dream, really. High and tight flags don't perform as well as they used to).

Answer 3 (Stop price?): In this high and tight flag, a stop is difficult. Placing it below the red-circled area (about 19, shown in the prior chart) would be great but it's too far away. A volatility stop would place it at 22.92, or about 12% away, base on 2x volatility. The above chart shows where I placed it.

Here's my notebook entry for the trade.

"Date: 29 August 2005. Buy stop at 25.99, good till canceled for 2 weeks. Filled at: 26.02 on 30 August 2005.
Stop: flag low, whatever it happens to be. Now it's 24.95. Stop placed at 23.48. Upside target: 6.32+ flag low (24.95) or 31.27.
Future S&P direction (guess): Down
Buy reason: High and tight flag. Placed a stop order to buy in a penny above the flagpole high (which is 25.98).

30 August 2005. Volatility is $1.71, so the stop should be no closer than today's low of 25.19 - 1.71 or 23.48. That's about 10%."

The volatility measure I used then was 1.5x the volatility reading instead of the 2x multiplier I use now. The above chart is a day later than the previous one.

"31 August 2005. Stop raised to 23.86, 1.74 (volatility stop) below today's low of 25.60."
Question: Is it time to sell?
4 / 6
chart pattern

"1 September 2005. Stop raised to 25.09, or 1.44 (volatility stop) below today's low of 26.53. I think we dropped off a large up move a month ago. That's why the big change in volatility."

I raised the stop again, as the above notebook entry says.

Question: Is it time to sell?
5 / 6
chart pattern

How about now? Time to sell? This shows price as of 9 September 2005, eight days later than the last chart.

See the next slide.
6 / 6
chart pattern

"Date: 14 September 2005. Filled at: 25.06 to 25.08. Sell reason: Hit stop."

The stop took me out for a 3.8% loss. Price eased down to a low of 23.37 before making at a recent (as of the chart date) high of 32.74. The decline to 23.37, meant a potential loss of 10%.

Did I make a mistake selling too soon or should I have weathered the drawdown? That's a question only you can answer because one day, you will be confronted with a similar situation, too.

The end.

See Also

 
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Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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