Part III – High Tight Flags : Ranked #1 of 23 patterns
So, what is a High Tight Flag?
“Once the stocks are selected on a price-rise basis, then look for the nearest consolidation area. In my selections, I did not care how long the stock consolidated nor how far the flag descended before turning upward. All that mattered was that the consolidation area was plainly visible to the casual observer. The consolidation area should be about double the price of the prior 2-month low.” – Bulkowski
The pattern owes its appearance to several catalysts.
- A new product or service, that has institutions excited.
- Institutions validate the product/service by accumulating shares.
- Fast accumulation forms the pole in less than 60 trading days.
- After the initial accumulation shares consolidate.
In the original post, we looked at AGIO, where we highlighted an entry near 62.50. Our homework indicated that the company was a biopharmaceutical company and leader in the fields of cancer metabolism and rare genetic disorders of metabolism. The stock went on to produce more than 100% returns peaking around 136.00 per share.
Below is a chart of MDXG that recently popped up on our High Tight Flag scan. This is a potential candidate, if it flags again. It broke out of the most recent flag on Friday. Volume indicates institutions are active.
Here are quotes from the recent conference call. (CEO Pete Petit).
“I’m going to start by giving you some overviews of our first quarter revenues, profits and cash flows…… ss we previously announced our first quarter revenues exceeded the upper end of our guidance and reached $72.6 million, that’s a 36% increase over first quarter of 2016.
As we look forward in 2017, we are very confident about our revenues continuing to grow in a robust – at a robust pace as we have forecasted. We’re confident our second quarter continuing our growth trends.
We are very confident about third and fourth quarter growth trends because we will have completed the wind out of our AvKare contract and those administrative distractions.
Therefore, we should expect to see an increasing degrees of profitability as the year unfolds.”
Pretty bullish comments from the CEO, still we will not chase MDXG higher. We will monitor for an appropriate entry point.
Here are the additional candidates that populated the HTF scan, ranked by performance over the past week.
Remember to check earnings before any new entry. Also check the bullet points at the beginning of this post for an understanding of the potential in any HTF candidates.
Happy Trading – Vinny