Bull Flag on WeeklyOne of the things I do regularly is to review picks that have not worked out the way I thought they would and try to figure out why. Kaminak Gold was one that I called a Falling Wedge pattern on my November 8th newsletter. Click here to read about the not so good call. :) That's okay, I can't be 100% accurate all the time. Technical Analysis , they say, is about being right 60% of the time. I like to do a little better than that...
So why did that call not work as planned? Could it be that the formation was not the right one and a longer term pattern was actually developing instead? Looking at Kaminak and where the price action pulled back from, it gave me the clue. What if this play was being created on a weekly chart? I rarely look at weekly charts because I search for plays that will return the most within a short period of time. Pulling up a weekly chart it became instantly obvious. A Bull Flag pattern on the weekly. And where it pulled from my November 8th call was the top of the trend line with only average volume.
A Bull Flag requires heavy volume in order to break out of the Flag formation. Also, the duration of a Flag portion of the Bull Flag pattern generally breakout to the upside within 12 days. Another reason why I was not seeing it on the daily chart. If they form on a weekly chart, then the breakout generally occurs within 12 candles, I say Candles because I'm looking at a weekly chart and each candle is one week. So the breakout should occur within 12 weeks. We are now at week 13 in the Flag formation and volume has been building over the last three weeks.
If breakout occurs this week, it will be around the $3.10 level with a marked increase in volume as it get pierces the upper trend line. The measured move on a Bull Flag is the vertical distance of the Pole portion, which in Kaminak's case is $3.00, making the target for it at $6.10 for a whopping 96.7% gain. Now before you get all excited, remember that this is a weekly chart, so target won't be reached for 6 to 10 candle (read weeks). So this is outside my normal swing trade window, but for those looking for perhaps a longer investment timeframe, this might be the play for you. Below are both the daily chart (first one) and the weekly chart where you can better see the Bull Flag pattern.
For chart see here and other weekly picks can be found here.
Cheers!