After reading Hattery’s piece in the Peanut Gallery, I was reminded of some recent requests to work on a High Tight Flag scan. I followed a link provided in Hattery’s piece to this site, which has some great information about the pattern and some possible ways to trade it.
Using Bulkowski’s research and pattern specifics, I began to work on some code to identify High Tight Flags.
The code will require some more work in order to find HTFs that are near perfect, and then I’ll need to add more code to be able to backtest a system to test the pattern. Right now it is a work-in-progress.
Here are the two stocks the HTF code has identified tonight.
Note that COOL has already broken out from two HTFs this year.
VRUS is less than .20 cents from breaking out from a HTF.
Maybe GROW can help you gather more data …. High but not so tight after the last few days but similar to the VRUS pattern …
GROW is nowhere near fitting the pattern for a HTF. Still, not a bad pullback to watch.
iBC … $ in the bank!
This is cool! You could find ’em and we could buy ’em.
I want to buy them too!
Woody, such a scan would be awesome! H&T Flags treat me well – rode TZOO from 68 all the way to 79 recently.
Nice!
Should be interesting. I love HTF’s. Looking forward to your stuff.
JAZZ was a recent HTF. From $10 to $20 to form the pattern. Nice run since 20!
Wow, JAZZ is pretty!
Great post. Wood, awesome to have another wise pair of eyes looking for the same thing. What are your thoughts on using or omitting biotech or not or possibly even consider once you gather more data in the future making the screen more sector specific? On one hand, there seems to be some concerns that due to the possibility of major gapdown (like ARNA) that it allows for more “fat tail” events aka denial of drug approval. On the other hand, that could just be results/experience bias, and there also exists the possibility for a HUGE spike upward or a drift over time…
DNDN was a disaster in 2007 if you bought at Bulkowski’s buypoint before it broke to new highs, but look at 2009! Looking at where it is now just makes you slap your forehead for missing it, so maybe biotech should be included? Plus, it would be difficult to gather enough data to see which sectors perform well. Stops don’t really work, but the upside seems greater. Makes it a nightmare in terms of having some sort of risk/ reward determine how much to invest since you can’t rely on the stop, but at the same time, it may be worth it. I don’t believe Bulkowski omitted biotech and one of O’Neil’s big winners mentioned was biotech. So by ommitting it, itt would also cause problems if you rely on Bulkowski’s results.
Would you not consider ALU a HTF breakout? Is a 94% to peak in just under 2 months good?
ALU looks good to me. Read my next post for my thoughts on bio-tech.
Love’un hgh & tight
DO A BACK TEST ON THS ONE !!
The gold price takes the form of a very uncomplicated formula,” says Jim Grant, “all you have to do is divide 1 by ‘n’ … ‘n’ being the trust in the capacity of people like Ben Bernanke to manage (paper money). The smaller ‘n’, the bigger the price,” says Grant, explaining the yellow metal’s bull run. Comment
is this the same as parabolics? many thanks sir.
Don’t think I’ve ever heard of parabolics. Can you say more about it?
Thanks for posting on this pattern as it’s one of my favorites.
A properly formed high, tight flag pattern is pretty rare, according to Wm. J. O’Neil, occurring only 1-2 times per year. I don’t have any of Bulkowski’s books but it appears to me on his website that he calls out the HTF pattern where I don’t see it forming. But then, TA is always up for interpretation.
O’Neil gave 4 examples in his How To Make Money in Stocks book, and gave this criteria:
1. A stock advances 100% – 120% in a short time period, usually 4 to 8 weeks.
2. Sideways correction 3-5 weeks, and no more than 10-20% <— that last part is a key element that eliminates a lot of stocks, but it also ferrets out the weakest candidates.
Note: It's also probably important to mention that O'Neil did not consider the universe of low priced stocks (generally anything under $10/share) as he felt them to be too risky, so that eliminates quite a few possibilities as well.
O'Neil mentioned that "the pattern is risky and very difficult to correctly recognize or interpret."
TASR formed a HTF at the very beginning of its move when it made its huge run back in 2003-04. Keep in mind that TASR had multiple stock splits of 3/1, 2/1, and 2/1 in 2004 which means the stock was trading at $13.50 when it broke out from its pattern on July 22, 2003.
Here's a chart of TASR in that time period. Note how the correction inside the flag was just 12.6%.
http://chart.ly/guarfn2
Thanks again for bringing this pattern up for discussion.