stockbee

A minor pullback/consolidation may be the next step for markets

2012-01-27T08:44:00.004-05:00

When you have a very positive day after market being up for many days, lot of time the speculative juices get flowing and you lose situation awareness. Yesterday was one of those days where a gap up got too many excited. As I said in my early morning post such gaps tends to be faded.

It is important to understand why it tends to happen. Market consist of participants with different profit objectives and holding periods. Most short term traders would quickly book a profit of 5 to 105 in just 24 hours. So gap up is used for profit taking.

Besides that market has been going up for some time so more traders are prone to taking profits on extended position.

A minor pullback/consolidation may be the next step for markets.

Understanding the maths of swing trading

2012-01-26T09:09:00.004-05:00

Swing traders look for 5 to 20% kind of moves in a short period of time.

In order for these moves to make a difference to your account you need to understand the maths of returns.

Let us say you hold 20 positions of same size in your 100k account. Then each position becomes 5k. Let us say a stock you buy goes up 10% after entry , how much is it going to contribute to your overall profit.

Only .5%. You will need 200 such trade for a 100% returns.

But wait a minute for most traders the success rate of a trade actually working is going to be around 50% only. Which will mean 200 trades will not get you to doubling.

Supposing you risk 25% on each trade instead of 5% of capital. Then a trade with 10% potential will give you 2.5% overall return. If it is 20% return trade it will give you 5% overall return on your capital. You will need roughly 15 consecutive trades of 5% overall profit to double your money.

And you can keep on doing this math to understand the maths of swing trading better.

The implication of that is in order to make big returns in a year you will need anywhere from 300 to 100 trades depending on how much you risk per trade.

If you do not want to do that then position trade. You can if you have skills look for position trading method which will you that kind of return in 4 to 5 trades. Very few people in the trading world will have that skill.

The easier path is to swing trade and expect to make 300 to 400 trade if you are looking for triple digit kind of gains.

But at the same time, everyday look for opportunity where you can put in 25% or more of your capital in one idea. In a year if you get few of those big wins of 4 to 5% or 10% returns on your capital, it then drives your returns higher.

If you understand this maths you will also understand why good day traders make big returns. It is simple maths, there per position risk is higher. A day trader often puts in significantly large part of his capital in one single trade. So even a small 3 to 4% profit contributes more to his or her returns. Add to that leverage and you are looking at magnified returns.

Now let us suppose you understand this maths , how can you use it in real life trading.

1. Look for opportunities to put bigger amount of capital per trade while managing risk

2. Strive to keep per trade loss as low as possible. It does not matter if you have lot of scratch trades you close immediately if they do not work

3. Focus on Stockbee Dollar breakouts, they offer you opportunity to risk bigger per trade.

4. Stop dreaming about doubling money in few trades (if that happens that is bonus, but you do not base your method on that if you are swing trader)

5. If you are holding 40 to 50 small positions, realistically look at the probability of you making big returns. It will be low. Mutual funds do that and that is why their returns suck.

Most importantly understand the maths of swing trading means finding 20 or so swing trades in a year where you can risk big......

Money is rotating in to new stocks and new leadership is emerging

2012-01-25T08:29:00.004-05:00

It is a bull market and time to keep aggressively looking for opportunities.

Unless there is high volume selling , any dip is buy opportunity.

First time in a year so many stocks seems to be setting up well. There are many first and second stage bases being formed.

Money is rotating in to new stocks and new leadership is emerging. As long as you see good setups, it is good place to be in.

Markets are steadily climbing higher

2012-01-24T08:32:00.005-05:00

Markets are steadily climbing higher. In short run market is extended but the underlying buying pressure is strong. The quality of setups showing in breakout scans are good. So as of now a pullback may not kill the rally.

Two good breakouts

2012-01-23T10:09:00.004-05:00

ASPS: Altisource Portfolio Solutions

TDG : Trans Digm Group Inc

We are fast approaching extreme bullish breadth levels

2012-01-23T08:20:00.004-05:00

Stockbee Market Monitor

We are fast approaching extreme bullish breadth levels on the MM.

In the short run that is likely to lead to a correction/consolidation. However you would see many first stage bases on host of stocks. There are few late stage bases but most stocks have recently put in bottom and have started rallying. In light of that context this move may not be over and likely to continue for some time after correction.

The long sideways action after the October bottom has resulted in very good bases and unlike previous bounces in market you do not see V shaped moves.

Besides that absence of 300 plus days during this move indicates systematic accumulation and the footprints of large fund buyers.

The earlier phenomenon of all stocks moving together has also stopped. We are getting a stock pickers market.

All in all the context of this move indicates a possible start of a longer duration bull move.

In short run however expect a dip of 4 to 5%.

Market continues to have breadth thrust

2012-01-20T08:22:00.002-05:00

Market continues to have breadth thrust and is quickly approaching extreme positive breadth territory.

Secondary indicator of stocks up 50% in a month is above 20 . That indicates extremely strong buying environment. Typically such extreme breadth results in correction in next one to 2 weeks.

Extreme breadth by itself is not negative. But if it is followed by high volume selling then it is a worry area.

As of now the setups look good and cyclical and beaten down stocks continue to attract buyers in hoards.

Stocks breaking out to new high have had mixed response. Many have not moved much beyond b/o day.

Out of all the b/o and dollar b/o one of the buy ideas is CNW (Con Way Inc.

Joe Fahmy: FREE Webinar on Relative Strength

2012-01-18T08:49:00.007-05:00

Make sure to sign up for my FREE Webinar on Relative Strength today (Wednesday, January 18, 2012, 4:30PM EST).

Here’s the link: http://joefahmy.com/2012/01/11/free-webinar-on-relative-strength-wednesday-january-18th-430pm-est/

At the end of the Webinar, I will be offering a special discount code for my upcoming Seminars. The seminar promotion will only be available for 24 hours after the event.

Thank you,

Joe Fahmy

We are experiencing a bullish breadth thrust

2012-01-17T09:04:00.001-05:00

We are experiencing a bullish breadth thrust. Buyers have been in control for last 10 days or so. The dip on European downgrade was bought.

The market started this bull phase in October. After the initial burst of aggressive buying the market had a dip pullback and went sideways for few months. This has resulted on many momentum stocks setting up well as they made sideways moves or pulled back near high. Many of those are now breaking out.

Some of the sectors which lead the first leg of the move had failed breakouts in recent week. Oil and gas and railroads sectors are example of that.

Buying is still concentrated near 52 week low and follow through has been better on stocks near lows.

At this stage unless there are series of 300 plus day to the downside the move can still continue. But keep a close eye on sentiments and extreme readings on MM.

There were couple of good breakouts on Friday like VPHM and ELGX.

A stampede to get in to beaten down stocks

2012-01-12T08:52:00.003-05:00

What you saw yesterday was a stampede to get in to beaten down stock. The top 10 stocks up the most yesterday were all beaten down stocks. And they were up on huge volume. ENER, HSOL, EK, JASO, JKS, SOL, TSL, STP, WFR, YGE were up 20% plus in few hours after open.

No matter how you look at it, weak , beaten down stocks leading the action is a loud warning sign. Couple that with failures of breakout to 52 week high. And very low appetite for growth and momentum name is telling you something.

It is not a usual market behavior. Rallies lead by beaten down stocks tend to be short lived. And more than that market is up 15 to 20% kind from October low and at this stage if the rally has longevity you should not be seeing this happening.

When junk starts to fly +people tell you it is different this time+extreme bullish sentiments by retail investors + 50% plus sentiment reading by adviser+ failure of b/o near high= possible correction brewing.

So enjoy the party while it lasts but don't let the unusual action fool you.

Slow crawl up

2012-01-11T09:12:00.002-05:00

Market has been slowly crawling up. In recent 8 trading days we have had positive breadth .

As you can see we are having good breadth thrust. As a result underlying breakouts on momentum stocks are working currently. But at the same time big moves are primarily happening on beaten down stocks. Three of the biggest winner in last 5 day are DNDN , LCAV, and REE. All three started their move from 52 week low.

Beaten down stocks continue to lead the action.

If you are looking for a nice breakout idea that might work for 10% kind of profit look at DFS. It is one of the financial stock near 52 week high and had high volume breakout yesterday.

Expect earnings breakouts and breakdowns to dominate the action

2012-01-09T09:17:00.004-05:00

We continue to see mixed action with both breakouts and breakdowns. But some breakouts have nice setups.

Breakouts from bottom are best working breakouts currently.

WTW, LULU, NFLX, BFR, DNDN, GGAL , REE, are some of the biggest moving stocks in last one week. And they started the move from bottom.

On the short side SPRD,BKS, ANGI, GRPN, SPRD, APKT, MA, PSMT, SHLD, are some big moving stocks.

We are getting in to earnings season. So expect earnings breakouts and breakdowns to dominate the action.

Stocks that were going sideways for few months are having breakouts

2012-01-06T09:25:00.000-05:00

We had 5 days of positive breadth with 3:1 stocks breaking out 4% plus.

As a result we have breadth thrust on 5 day cumulative breadth indicator.

Stocks that were going sideways for few months are having breakouts.

A 300 plus breadth day on negative side will indicate flagging momentum. Till you see that kind of selling the move still has power.

However high intraday volatility and shakeouts continue to be problem for putting close stops.

The trend of beaten down stocks making big moves continues.

The most attractive sector from momentum and 52 week high point is oil and gas.

CLR is one of the better looking Livermore kind position play.

Market tells you a lot from the way breakouts work.

2012-01-05T08:44:00.001-05:00

Market tells you a lot from the way breakouts work.

If breakouts do not have immediate follow through it indicates weak conviction. This is the case currently. Many breakouts fade by end of the day.

Similarly if you see breakouts to new high getting sold , it indicates distribution by larger players. You will see hundreds of examples you can see currently.

If you see only late stage stocks breaking out it indicates tired market unlikely to make big move. This is the case currently where new leadership is lacking.

If you see large stocks breaking out and making moves it indicates funds are seeking safety. Large caps have been leading recently.

If you see beaten down stocks dominating breakout list it indicates lack of conviction and short term commitment by funds.

If you see stocks after stock that made big move in last 2 year getting in to trouble and having hard breakdowns, it indicates distribution.

In an environment like this unless you are a day trader your primary concern should be risk management.

Your total risk exposure to the market should be at level where if things turn sour you should be able to get out with minimum damage.

A real bull market lasts months and offers several opportunities. So if it shows up you will not have trouble finding setups and make big money if you have thought through your setups

Market attempting a breakout of range

2012-01-04T09:07:00.000-05:00

markets made a big move in October and then settled down in to volatile range for last 2 month. In recent days the market is attempting to breakout of this range.

The breadth trends have been all over the place in last 2 month. As of now the Primary breadth indicators continue to be positive.

Underlying setups are not very attractive for swing traders. Breakout continue to fall. Many moves are small and whipsaws are common.

Aim for orbital change in 2012

2012-01-03T09:32:00.002-05:00

Making real progress in life or trading or relationship or career is like a orbit jumping process.

Your task is to jump from lower orbit level to next higher orbit level in terms of success. The more orbits you can jump better is life for you.

If your objective is to jump orbits in trading then, \you will need to put in efforts to enhance your understanding of markets, market history, market setups, trading methods, market timing tools, vehicle selection tools and so on.

If your objective is to jump orbits in terms of your earnings power in career then you need to put efforts to enhance your skills and knowledge sets. You need to build competencies which will dramatically alter your earnings potential. Unless you try to jump orbits your earnings will not rise dramatically. At regular rates of salary hikes you are unlikely to end up with dramatically different earnings potential in 10 or 15 years from today. But if you put efforts in climbing the orbits you will have unimaginable earnings potential. In my first job my salary was 36000 Indian rupees per year. After jumping 4-5 orbits in 12 years it went up to 4000000 plus top of the line perks I had never imagined that was possible when I started out.

Same way if you are in a business and built a small successful business, unless you make orbital change you will continue to be in same orbit in terms of your earnings potential. From a 2 million business if you can jump to 20 million orbits then the fun and view is different. Too many small businesses get stuck in orbits for years and some steadily lose momentum and in fact go down to lower level orbits.

In your personal effectiveness and personal relationships also it is the same thing. If you want to enhance your personal effectiveness you need to develop leadership skills. You need to develop skills in managing people better. You need skills in self evaluation. All these areas of skills are easy to acquire once you decide to build them.

Certain amount of energy and effort is required to jump from one level to the next.Orbital changes are not small incremental changes. "Orbital changes" are changes which push you in to next level of orbit in terms of success or competency or earnings potential.

These are very significant changes, requiring changing major set of beliefs and assumptions and freezing that new change and belief. Unless your current beliefs and assumptions completely change and are in tune with the new orbit you want to go to you will find dramatic changes are difficult. Our current way of thinking and doing keeps us in current orbits. In addition many times our relationship, friend circle, relatives, co workers often actively work to keep us in current orbit or pull you down in lower orbits.

We are constantly subject to gravitational force which tends to either keep us in same orbits or pulls us down. We acquire bad habits, we become lethargic, we get in to wrong social circles or sometime we self sabotage our own effort and progress. So we really need herculean effort to break away from the orbit.

When the shuttle is launched in space 80 to 90% or more of the fuel is spent in first few minutes during the take off phase. Once the take off is successful only the remaining 10% fuel required to keep the shuttle in its orbit. And very little fuel is required for it or return journey.

Same way if you want to jump orbits, you need significant effort at beginning. You need 90% plus effort in short concentrated period of time to jump to your own intended orbit , be it related to trading, career or personal happiness.

Small progress is easy. Significant progress is difficult. If you want dramatic change in your life or trading , you need to change your current set of beliefs, assumptions and world view dramatically. You need to put above your current capacity kind of efforts to thrust yourself out of current orbit.

When the shuttle is launched only few people travel in it, but hundreds and often thousands of people are on ground supporting that mission. Same way if you want to thrust yourself in to next orbit, you need support team that will ensure that everything aligns to make your flight successful. To jump orbits you need to build your support team.

If you want orbital change in your life then not just one or 10 things need to change but 1000's of things need to change.

"Orbital changes" require change in your mental models. Mental model is a psychological concept about how our mind works. Mental models are deeply held mental images, beliefs, and assumptions. The mental models play a very important role in dealing with world around us.

We interpret the world according to our mental models. Mental models are coping mechanism for the complexity around us. So we simplify the world around us and form certain beliefs and assumptions about the world.

This creates our own inner world. Our own interpretation of how the world works. That reality we create is based on "assumptions and beliefs", it is not necessarily based on logic or scientific fact. Two people with different mental models react and interpret same data and same situations differently. Mental models include what a person thinks is true but not necessarily what is actually true.

Your current mental model drives all your behavior. If your current mental model is say that to manage this business I need to be hands on, a manager will not be able to do what I do, then you will be limited by your mental model. I talk to many small business owners and many of them have this kind of mental model. They can not imagine a manager or some other person can take up the job they currently do and then that will allow them to take up bigger things to do or will allow them to expand their business. You will find this kind of mental model is very common in many small businesses. That mental model stops them from going to next orbit.

If you want to understand mental models study religion or marketing. All religions are based on mental models. Similarly most marketing efforts are based on very deep understanding of mental models.

The mental models are extremely easy to understand in the context of religion. All religions basically manipulate the mental model of followers (followers do not see it that way). Once you start "believing" in a religion, world get simplified, because you adopt a mental model. If you study the religious indoctrination practices you will see there is great emphasis on “acceptance”. Once you “accept” certain religious figure then you assume that mental model.

So hard core believers in any religion be it Christianity, Judaism, Islam, Buddhism, Hinduism, Taoism or any other "ism" hold many irrational beliefs. More than that their behavior flows from their mental model. That is why people do extreme things, kill and torture people, punish themselves once they become believers. And they do it willingly.

Religious leaders understand this very well and if you study religion very closely and the tools they use, you will see how the religious pyramid scheme is like Amway, designed to indoctrinate and reinforce everyday and every moment a certain mental model.

Marketers and advertisers also manipulate your mental models to make you do certain things. That is why you grab a Coke instead of glass of water when you are thirsty or drive 30 miles to a mall because it has a 50% off sale or your riot for new pair of shoes.. Marketers add value to the product which does not exist in the product itself. And how do they do it? By changing your beliefs and assumptions .

Successful leaders also manipulate mental models. Leaders change followers mental models.
Followers cannot do it on their own, that is why they follow a leader. The entire process involved in leadership is about changing followers mental model through communication. That is why you will broadly find two types of leaders, the ordinary leaders and the transformational leaders.

Ordinary leaders are like marketers, they just study the existing mental models of followers and reinforce certain things in it, or talk about things that followers want to hear. They understand trying to change the mental models significantly is risky and will require tremendous effort.

The transformational leaders do the difficult task of creating a entirely different mental model in their followers. They bring about radical change. They are real visionary.

Because people are uncomfortable in making radical or "orbital change" , in most cases they choose safer leaders. If you want to aim for orbital changes then you need to look for visionary leaders or disruptive leaders. Better still you need to become your own leader.

While we aspire and hope for transformational leadership, when it comes to actually choosing them, we don't want to go through the effort of changing our mental model , and we choose safe leaders. Politicians know this very well and so they calibrate their message very carefully to promise enough change but not radical change.

You need to change your mental model

From a practical perspective, on individual level, if you want to change your life, you need to change your mental models.

If you want dramatic change in your life, you need to change your current set of beliefs, assumptions and world view dramatically.

That is what most people at beginning of new year want to do , so they make resolution .

Resolution is intention, but to achieve the intention not just one or 10 things need to change but 1000's of things need to change.

But because our mental models are hard coded and we have built entire structure to reinforce them, change is difficult.

Once the mental models get hard coded, it is difficult to change it.

The reason for it is cognitive dissonance.

To launch yourself in next orbit you need extra ordinary effort and mental model change. Self directed orbital change is difficult. You are constantly fighting your basic tendencies and get prone to gravitational force of your current assumptions and beliefs.

If you understand this, you will find that most of the time "orbital change" is precipitated by some extraneous event or major change in life situation. Significant loss in trading account leads people to question their basic assumptions and incorporate new methods or rules. A significantly profitable year or period can lead you to pick up new mental model. If you study the history of successful traders you will find the role played by such event catalyst.

In your personal life also event catalyst are very powerful motivation for orbital changes. A death on near or dear one leads to change. A divorce leads people to question long held beliefs and assumptions and then they make orbital changes to build better life afterward. For a troubled teenager a interaction with highly successful leader or mentor changes your beliefs and you go on to do something with your life. A disease, surgery, treatment experience leads to change.
Change in geographical location leads to change (especially true of small town people going in to large towns). Everything changed for me when I migrated from India to USA. You fall under the charm of extremely influential person, teacher, mentor or boss. You handle a very big assignment, which was beyond your capabilities.

Self directed mental model change is the key.What you are interested is self directed change in mental models. If we want to do it as a self directed process , you need some sort of template. It is easier to accomplish some of these things in facilitated encounters. Successful people in all walks of life have the capacity to change and reinvent their mental models several times during their lifetime.That is why they continuously keep moving in to new orbits

Mediocre people in most walks of life get stuck with a mental model and spend their entire life in a orbit, never managing to climb to next orbit.

If your trading or life is stuck in orbit it is time to aim for orbital change. Do not just do incremental changes but do dramatic changes. Try and jump couple of orbits in your trading career or in your personal career or in business. as a stockbee member you have access to lot of successful traders who have jumped orbits. You have the infrastructure and team which can support you in your effort. You have problem with scans, setups, software, stops, risk management, market history, or you name it and there are enough people in the stockbee member community to help and support you. The amount of intellectual firepower and experienced fire power and resources you have at your disposal amongst the 1000 plus stockbee members is something which you can use to jump your orbits.

Same way there are hundreds of people here who have jumped many orbits in their career or personal life and they can help you jump orbits in your own life.

Time to launch your trading career and life in to next orbit in 20112

Happy new year everyone !

Member Feedback

2011-12-30T09:18:00.001-05:00

Just a small note to thank you for your site and to wish you happy new year. I am glad I found your site last year. I had lost lot of money in my investment and in the past subscribed to many newsletters, but your site is the only one that really gave me a trading template to use on my own.

I love your effort at enhancing members understanding of markets and setups. The series of posts and videos on setup selection have been excellent. That made me think about my trading. I look forward to each of the post on that topic and eagerly wait your next round of discussion about swing trading setups.

Your site is unique in the trading newsletter/ trading blog universe. It has so much information and it focuses on teaching people to fish on their own rather than just stock picks. The members interaction is great. I have learned so much from discussion of members method. I especially appreciate the contribution by ckergin, robbiefx, vbbee and heatherjones. I have been using the vbbee method on TNA and has been very successful. Thanks for offering a platform for members to share such methods. You have a great community.

Once again happy new year and all the best for 2012. I look forward to learning more and enhancing my self efficacy.

Praveen B.

Member Feedback

2011-12-27T09:52:00.000-05:00

I learned a tremendous amount from Stockbee. Before reading this blog and joining the Stockbee site I had no true method or self awareness, but now one year later I can honestly say I have a method for trading, an understanding of swing trading and episodic pivots, as well as a self awareness of my trading psychology and am working every day on self efficacy. All this thanks to Pradeep Bonde who is a wonderful straightforward teacher! Thank you from a beginner who needed direction!

Heather

Member Feedback

2011-12-23T09:42:00.003-05:00

I have subscribed to many many things over the years both fundamental and technical. Nothing approximates the value added service that Pradeep provides. I am looking forward to the Bootcamp and enjoy the WEB site the videos and thought process tremendously, he is forcing me to think through all my methodologies even systems not related to swing trading.

I love the site Thank you very much for doing it.

Jamie E

Finally Santa showed up

2011-12-21T08:57:00.000-05:00

Digestion after a big bounce. That is likely scenario today.

As widely expected by most market participants finally Santa showed up. It was a big snap back rally after market had been oversold for sometime. And it came in after many had given up hope. The underlying breadth was good.

Going by this years market history I would give the move a 7 day benefit of doubt as long as breadth holds. Moves since February have been of at best 2 week duration.

Volume would be low as many participants will be in holiday mode.

A weak market trying to hold its recent gains

2011-12-20T08:59:00.001-05:00

Breadth continues to deteriorate and at this rate might soon be in bearish territory. Stock continue to be under pressure and breakdowns on recent winners are piling up.

The news from Europe continues to be relentlessly negative. It undermines any bounce attempt, however short lived.

The sentiments continues to be bullish. All in all a weak market trying to hold its recent gains.

Historical tendencies

2011-12-19T09:14:00.000-05:00

If historical tendencies hold then we might get 2 week year end rally on low volume.

Europe remains the drag on the market. Any news or statement from Europe will kill the rally or accentuate it.

Because market has gone sideways for 2 month after the 20% move from the October low, there are many much better looking setups currently.

Market has spent months going sideways this year.

2011-12-16T08:44:00.002-05:00

Short term trend down for few days.

Intermediate term trend sideways. Market has spent months going sideways this year.

Market has best chance of putting together some sort of bounce here as it is oversold. Many leading stocks continue to breakdown.

Situational Awareness

2011-12-15T08:17:00.002-05:00

Market currently in down swing on smaller time frame. n larger timescale stuck in range.

For over a year the market is range bound. Rallies have an average duration at best of 2 weeks.

While it is possible a bounce might develop in year end as of now unless you see breadth day (300 plus day to upside on 4% b/o) it is still not a market to be aggressively long. Same thing applies to short side.

William O'Neil Setups

2011-12-13T09:18:00.002-05:00

William O'Neil Setups

Historical precedent analysis is the cornerstone of William O'Neils effort.

Study what has worked in history and look for similar stocks+setups in today's market.

O'Neil also detailed vehicle selection strategy. Which Livermore just alluded to.

O'Neil also added market timing to the setup idea and created detail guidelines for market timing.

William O'Neil setup: cup with handle

Most commonly found setup in stocks with momentum/growth

William O'Neil setup: cup with handle

For each element of the setup O'Neil has detailed guidelines. For example the first leg should be up at least 30%. During that period stock should have improved its relative strength v/s market and should have substantial volume increase during the move compared to its average 50 day volume.

If you read O'Neil book in detail , it will give you detailed guidelines for every element of a setup.

Dan Zanger has said it many times that he has read O'Neil book 100 times before he got every thing in it and he still continues to read it every few weeks.

I always buy 5 to 10 copies of O'Neil book when new edition comes in. Whenever some neighbor or some acquaintance approaches me asking for advice on market I give them a copy to read telling them this is very important book and my only copy. And tell them once you read it come back, and we can discuss. In the book you will find method which can make you lot of money. So far I have never got the book back from anyone of the people I game it to and most do not come back also.

William O'Neil setup: double bottom at top of the range

Double bottom near high is another commonly found setup in momentum/growth stock.

William O'Neil setup: flat base

This is nothing but Darvas box setup. But again O'Neil has added significant details to define it.

These are second stage bases (bases that form after a primary base such as the cup with handle). According to O'Neil a "flat base usually occurs after a stock has advanced 20% or more off a cup with handle pattern". The 'flat base' moves straight sideways in a fairly tight price range for at least five weeks and does not correct more than 10% to 15%.

http://bit.ly/sYsw0k

William O'Neil setup: Square Box base

http://bit.ly/tOT6Gj

The square box base is a quick-gulp consolidation. It can be as short as four weeks. The flat base, by comparison, forms over a minimum of five weeks.

This was introduced by IBD in recent years.

William O'Neil setup: High, tight flags

High, tight flags are rare.

Some chart readers like them because they can be powerful.

The pattern has a flagpole, formed by a rapid advance. It has a flag, shaped by a modest correction.

It is formed when a stock surges about 100% to 120% in four to eight weeks. That's the pole.

Then it corrects 10% to 20% in three to five weeks. That's the flag.

The ideal buy point is the high of the pattern plus 10 cents.

Essentially yet another continuation pattern , Darvas box kind pattern in high momentum stocks.

http://bit.ly/rM5m06

Reproduced from the Stockbee members site. On the members site there is more extensive discussion on these setups and how to set them up in Telechart.

Related:

Learn the language of setups

Jesse Livermore and Setups

stockbee

A minor pullback/consolidation may be the next step for markets

Understanding the maths of swing trading

Money is rotating in to new stocks and new leadership is emerging

Markets are steadily climbing higher

Two good breakouts

We are fast approaching extreme bullish breadth levels

Market continues to have breadth thrust

Joe Fahmy: FREE Webinar on Relative Strength

We are experiencing a bullish breadth thrust

A stampede to get in to beaten down stocks

Slow crawl up

Expect earnings breakouts and breakdowns to dominate the action

Stocks that were going sideways for few months are having breakouts

Market tells you a lot from the way breakouts work.

Market attempting a breakout of range

Aim for orbital change in 2012

Member Feedback

Member Feedback

Member Feedback

Finally Santa showed up

A weak market trying to hold its recent gains

Historical tendencies

Market has spent months going sideways this year.

Situational Awareness

William O'Neil Setups

William O'Neil Setups

William O'Neil setup: cup with handle

William O'Neil setup: cup with handle

William O'Neil setup: double bottom at top of the range

William O'Neil setup: flat base

William O'Neil setup: Square Box base

William O'Neil setup: High, tight flags

Jesse Livermore new high breakout setup

Livermore Round number Pivots Setup

Jesse Livermore IPO b/o setup

Jesse Livermore 3 point range breakdown failure setup

Invest in a setup idea....

Gary Kaltbaum setup