The three-weeks-tight chart pattern is one of the more rare strategies for finding winning stocks. But, when you see this special chart pattern develop among quality stocks, its best to make note of it, zoom in on the weekly chart and run the following analysis. In addition, the stocks below are candidates from the 3-weeks-tight scan that we run once or twice a week.
After a strong breakout on volume, most of the best growth stocks need to consolidate for a brief respite. We need to watch these patterns closely and ask a few questions. Do they maintain atleast two consecutive weeks with a narrow (1.5% +/-) price range? Does volume taper off and remain lower than breakout volume? And, do these candidates trade fairly tightly in each of those three weeks? If your answers are yes to all three add the stocks to your watchlist.
A review of the stocks presented herein yielded several outstanding companies. Hubspot (HUBS) a cloud based platform for delivering inbound marketing and sales tools, Sprout Social (SPT) a firm that enables social interactivity for businesses, and Paycom (PAYC) a cloud-based human resources software company. All three were added to the watchlist for the week.
Paycom 3 Weeks Tight?
Paycom (PAYC) provides cloud-based human resources life cycle software, delivered as software-as-a-service for small to mid-sized companies in the United States. It offers functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement.
RS line is rising as the stock breaks out of a tight three week consoidation, having previously formed the right side of a cup pattern. We could also categorize this three weeks as a handle. Depth of the cup ideally is less than 33% of the previous run-up.
The daily chart shows Paycom breaking out on Tuesday, August 24, following bullish activity on average volume, that started with a bounce off the bullish 9ema on Thursday August 19.
Hubspot and Sprout Social showed similar price action.
Note sales and earnings in the left panel, as the company maintains a stellar year-over-year growth rate of (+40%). We use an intial trailing stop of (-5%) on new entries.