15 April 2007
Joshing on Flag Target Calculation
Joshing wrote:
Joshing wrote:
I've traded UTAC before, so I know what you and Vangelis mean. Trading behaviour is rather odd.
However, there are merits to why I entered UTAC this round. (I did a lot of considerations)
Daily charts -
Past 3 days, highs were as follows - 0.94, 0.935, and 0.93. Today's high should be 0.925 but we have exceeded that. Share price has broken out.
Plot downtrend from 0.955 on 13th March 07, connect to 22nd March 07 at 0.94, and extend it past today's date. Confirmation of breakout.
There was a tweezer bottom at 0.92 yesterday and this short term bullish formation is complete when price moved above yesterday's high of 0.93
Flag formation (flag pole from 8th March to 13th) is now complete yielding upside target of 1.03/04, coincides with upside gap at 1.00-01 formed on 15th May 06.
Weekly Charts -
Weekly has a tweezer bottom at 0.905 last week. Apply the same rule of tweezers like earlier, this formation is complete when price moved above last week's high of 0.94
Coupled with the fact that price failed to move lower a few weeks back and closed back near the high on week ending 2nd March where we saw price hit 0.795
How does one calculate the flag target?
Since we have so much free time today, I thought I'd go through this.
The flag formation is characterized by a series of constant up moves followed by a consolidation mode. This consolidation mode can be above the highest point of the flag pole, around the highest point, or even below. As long as this consolidation doesn't move to near the lowest point of the flag pole, this flag formation is not considered negated.
As the flag consolidation moves to form, it will become more obvious whether the flag will break upwards or negate. The purpose of writing is to explain how to derive the flag targets and not to teach you how to identify the flag.
So first and foremost before continuing to read, you must be able to identify flag formations.
Since I already have a ready made example on UTAC, let's explore this one.
March 8th 2007, price low is at 0.865, closed at 0.905
March 9th 2007, price closed at 0.91
March 12th 2007, price closed at 0.94
March 13th 2007, price closed at 0.95
March 14th 2007, price closed lower than 0.95, i.e. negative.
These are 4 consecutive trading sessions. Note they have to be consecutive. Price has constantly closed higher. The important word here is "close".
To calculate the upside target, you take the beginning of the run at 0.865 and the highest closing of 0.95, and find the difference.
0.95 - 0.865 = 0.085
The difference is 0.085. You take this difference, and you add it back to the top of 0.95 and you will arrive at
0.95 + 0.085 = 1.035
This will be the target of the flag break run and to be even more specific, the bid and offer quotes will be at 1.03/04 for the target to be complete.
If the chart gets negated, this target will also get negated. Depending on circumstances, there is a chance that price will run to 3 bids below (i.e. 1.00/01) in times of bad sentiment, or overshot by 3 bids above (i.e. 1.06/07) in times of strong sentiment.
In UTAC's case, given the huge float, I don't think it will be able to overshoot. More likely than not, it will run to somewhere below 3 bids to target.
Joshing wrote:
Joshing wrote:
I've traded UTAC before, so I know what you and Vangelis mean. Trading behaviour is rather odd.
However, there are merits to why I entered UTAC this round. (I did a lot of considerations)
Daily charts -
Past 3 days, highs were as follows - 0.94, 0.935, and 0.93. Today's high should be 0.925 but we have exceeded that. Share price has broken out.
Plot downtrend from 0.955 on 13th March 07, connect to 22nd March 07 at 0.94, and extend it past today's date. Confirmation of breakout.
There was a tweezer bottom at 0.92 yesterday and this short term bullish formation is complete when price moved above yesterday's high of 0.93
Flag formation (flag pole from 8th March to 13th) is now complete yielding upside target of 1.03/04, coincides with upside gap at 1.00-01 formed on 15th May 06.
Weekly Charts -
Weekly has a tweezer bottom at 0.905 last week. Apply the same rule of tweezers like earlier, this formation is complete when price moved above last week's high of 0.94
Coupled with the fact that price failed to move lower a few weeks back and closed back near the high on week ending 2nd March where we saw price hit 0.795
How does one calculate the flag target?
Since we have so much free time today, I thought I'd go through this.
The flag formation is characterized by a series of constant up moves followed by a consolidation mode. This consolidation mode can be above the highest point of the flag pole, around the highest point, or even below. As long as this consolidation doesn't move to near the lowest point of the flag pole, this flag formation is not considered negated.
As the flag consolidation moves to form, it will become more obvious whether the flag will break upwards or negate. The purpose of writing is to explain how to derive the flag targets and not to teach you how to identify the flag.
So first and foremost before continuing to read, you must be able to identify flag formations.
Since I already have a ready made example on UTAC, let's explore this one.
March 8th 2007, price low is at 0.865, closed at 0.905
March 9th 2007, price closed at 0.91
March 12th 2007, price closed at 0.94
March 13th 2007, price closed at 0.95
March 14th 2007, price closed lower than 0.95, i.e. negative.
These are 4 consecutive trading sessions. Note they have to be consecutive. Price has constantly closed higher. The important word here is "close".
To calculate the upside target, you take the beginning of the run at 0.865 and the highest closing of 0.95, and find the difference.
0.95 - 0.865 = 0.085
The difference is 0.085. You take this difference, and you add it back to the top of 0.95 and you will arrive at
0.95 + 0.085 = 1.035
This will be the target of the flag break run and to be even more specific, the bid and offer quotes will be at 1.03/04 for the target to be complete.
If the chart gets negated, this target will also get negated. Depending on circumstances, there is a chance that price will run to 3 bids below (i.e. 1.00/01) in times of bad sentiment, or overshot by 3 bids above (i.e. 1.06/07) in times of strong sentiment.
In UTAC's case, given the huge float, I don't think it will be able to overshoot. More likely than not, it will run to somewhere below 3 bids to target.
Labels: Stock Trading System
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