Trade: High and Tight Flag (‘HTF’) that looks for 100%+ returns.
The last trade we identified like this went up 30% over the next three days – Clean Tec Holding (CLQ)
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Trade Criteria:
The HTF pattern is highlighted in black. There are a few key attributes that HTF need to increase the chances of seeing 100%+ returns:
1) Strong flag pole; the vertical black line shows the flag pole and needs to have a 75%+ rise. HIL has more than a 100% rise which bodes well for a further 100% rise from today (1 point)
2) The flag pole needs to be rapid with little interruption in the rise. HIL meets this requirement. (1 point)
3) After the strong rise in the flag pole, there needs to be a reduce in volatility, which can be seen by the black triangle highlighted on HIL. The movement within HIL’s triangle is very condensed being supportive of a further move higher. (1 point)
4) When the share price breaks above the black triangle the movement should be a strong, pronounced movement with a significant increase in volume compared to the prior two weeks. HIL shows a volume increase with higher volume in the orange circle, although Tuesday’s trading volume could have been more convincing. (1 point)
5) Strong movements from companies in the same industry/sector/theme. HIL has recently moved from building/consumer products to IT which distorts the theme for HIL to identify with. Regardless, of this recent change, both groups are currently performing well – however the future success of this trade is highly dependent upon identifying which theme is pushing HIL higher. (1/2 point).
Trading Insights:
For a checklist of early warning bells for leading groups and themes watch this video here
Company snapshot: HIL is a technology company with products ranging from building, health and home divisions.
Theme Background:
Building and home renovation products continue to perform well will low interest rates .
Technology companies are performing well as the necessary addition to any evolving industry. The strongest tech companies are those associated with strong leading themes (for example debt/ financing technology).
Summary:
4.5/5 points – or four criteria met and the most critical is half-satisfied, nonetheless, a good start.
Statistically, having that support of sister companies doubles the likelihood of this chart pattern returning 100%+.
Given the strong movement in ASX-listed nickel companies, HIL is a great opportunity for the fast-paced, rapid trader who is diligent on stop losses and identifying theme criteria.
Note: this is not personal advice, conduct your own research and consult your broker to see if this trade is suitable for your own circumstances.
