Uuuuuummmmmm.... We're not worthy. Got into ICE a little late as I was expecting it to retrace a bit more before resuming it's upward channel. I was seeing this as a channel, whereas you seem to be seing it more as a flag. I can see both, and it seems to be behaving more like a bull flag breakout. Either way... I got in on Wednesday and was tempted walk the plank yesterday, but... like you say... decided to head outside and decapitate a snowman. Today, all is better. I would never have traded ORBC except for a little bug that was put in my ear (on a certain blog) and bought at a bad time. So with today's pop, we're only up about 30%. Better than a poke in the eye with a sharp stick, as they say.
It's snowing outside and I'm going to go out and make ammends to the snowman. Then it's time to put our collective feet up, breathe a sigh of relief, fill up that glass of wine and let the good times role!!!
We're meeting with an options trader on Monday. He trades very differently than we do, so it'll be interesting to see how he trades. We'll keep you posted. He's doing it at home full time and making a very good living at it. Have a good weekend, all.
Chris and Catherine

Hi Jeff and fellow bloggers,
In looking at POT on a weekly and daily chart, I'm seeing a huge bull flag, but the angle of the flag is slightly uptrending. Does this slight uptrend take away from its validity?
Thanks!
Debbie Davis

Hi Debbie,

I am not so inclined to see POT as a long bull flag. The duration of the pattern is quite long and it looks more like a symmetrical triangle with a recent close above resistance. I am including a rather lengthy description of the bull flag pattern that I find useful and I hope it helps. If Jeff or any of the other bloggers disagree with this, please let Debbie and I know.


Implication
Description
Important Characteristics
Trading Considerations
Criteria that Supports
Criteria that Refutes
Underlying Behavior

Implication

A Flag (Bullish) is considered a bullish signal, indicating that the current uptrend may continue.

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Description

A Flag (Bullish) follows a steep, or nearly vertical rise in price, and consists of two parallel trendlines that form a rectangular flag shape. The Flag can be horizontal (as though the wind is blowing it), however it often has a slight downtrend.

The vertical uptrend, that precedes a Flag, may occur because of buyers' reactions to a favorable company earnings announcement, or a new product launch. The sharp price increase is sometimes referred to as the "flagpole" or "mast".




The rectangular flag shape is the product of what technical analysts refer to as consolidation. Consolidation occurs when the price seems to bounce between an upper and lower price limit. This might occur, for example, in the days following a positive product announcement, when the excitement is starting to subside, and fewer buyers are willing to pay the high price that was commanded just a few days before. But, at the same time, sellers are unwilling to sell below a lower support limit.

A bullish signal occurs when the price rebounds beyond the upper trendline of the Flag formation, and continues the original upward price movement. This is considered a pattern confirmation.

When speaking about Flags, technical analysts may use jargon and refer to the flag as "flying at half-mast". Visually, this reference is nothing like a flag at half-mast, such as on a day of national mourning. Instead, this term refers to the location of the flag - at the mid-point of what would otherwise be a continuous uptrend.

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Important Characteristics

Following are important characteristics for this pattern.

Trendlines

Flags are very similar to Pennants. However, with a Flag, the price trendlines tend to run parallel, whereas with a Pennant, the price trendlines tend to converge.

Volume

As the Flag develops, the volume tends to decrease. Following a positive product announcement, the price may have reached an unexpected high, and fewer buyers will be willing to buy. Interest in the stock may resume, however, as prices drop, and sellers begin to lower their price. The increased activity explains why you will often notice a sharp spike in volume at the end of a Flag.

Duration of the Pattern

Martin Pring notes in his book, Technical Analysis Explained that "Flags can form in a period as short as 5 days or as longs as 3 to 5 weeks." John J. Murphy identifies that Flags "often last no longer than one or two weeks."

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Trading Considerations

Possibility of Price Reversal

In some rare cases, the price will break against the original price movement, and create a reversal trend. The pattern reversal may be signaled during the Flag formation by a sharp increase in volume, as opposed to the more typical decrease.

Duration of the Pattern

The duration of the pattern depends on the extent of the price fluctuations (consolidation). The greater the fluctuations, the longer a pattern will take to develop.

Target Price

It is commonly held that the length of the flagpole indicates the potential price increase. When the Flag completes, the price typically jumps to replicate the height of the original flagpole, while continuing in the direction of the inbound trend.

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Criteria that Supports

Volume

Volume should diminish noticeably as the pattern forms.

A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume over the course of the pattern should be declining on average.

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Criteria that Refutes

Duration of the Pattern

According to Martin Pring, a pattern that exceeds "4 weeks to develop should ... be treated with caution". After 4 weeks, interest in the stock is likely to decrease to point that it is unlikely to continue in a strong uptrend.

No Volume Spike on Breakout

The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable and may actually reverse.

Long Inbound Trend

Shabacker writes that, "When a mast is long ... and it's Flag relatively small, we should naturally expect the movement to be pretty well exhausted when its indicated objective is reached." He suggests that when you observe this formation, and a price continuation occurs, it is best to use the flagpole as a "yard-stick" to indicate the level at which to "take profits, step aside, and watch for further chart developments."

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Underlying Behavior

This pattern is effectively a pause in an uptrend. The price has gotten ahead of itself with a steep rise; therefore market activity takes a break before continuing the uptrend. This pause is reflected in the decreasing trading volume. Similarly, a spike in volume marks the resumption of the uptrend.
Happy trading.

Sean M.

Great Post Sean.

Monday Morning, Everyne back on the horse ! Let's have a good trading week......

Sean,
Thanks for a very informative post. It helps to clarify a lot of questions. This blog is Great!
Debbie Davis