Tech Talk: The Bull
Flag
This market is now in the seventh year of its bull run –
certainly one of the longest in history. Interest rates have been a huge
contributor to those rates – after all, if you can only get a percent or two
on bonds, wouldn’t it make sense to be going after stocks when the business
climate is strong? Also, of course, it is worth remembering that low interest
rates have contributed a lot to the economy itself. A bit simplistic, of
course, but it does help explain why share prices have been so strong in
recent years. But I digress.
In this series of articles, I am initially describing some
technical patterns I personally find helpful when I am scanning the market.
Today’s pattern is the Bull Flag. This is a continuation pattern which occurs
after the flagpole (a tall, white candlestick) signals that the pattern has
begun.
Personally, I pay more attention to patterns than to the
nature of the stock, but just for the record TSO3 the company uses ozone (the
O3 in its name) for low-temperature sterilization. According to
the company’s website, this is an
efficient way to eliminate microbial contaminants that cause infection, and
has applications for sterilizing “simple and complex medical devices for
today and tomorrow.”
Several characteristics are apparent in the bull flag.
Price consolidation occurs quickly within the flag, with declining volumes –
a pennant pattern shown above by dotted lines. The next step is the breakout.
I already own this stock – I bought in when the flagpole firstshowed
itself.
Should you buy in? The classic approach is to wait until
the stock convincingly goes through the pennant, on high volume.
Just
to be clear, my comments on stocks are not buy-or-sell recommendations. Their
only purpose is to describe certain stock patterns and ideas, using current
