Monday, 12 March 2012

3 WEEKS TIGHT PATTERN

3 weeks tight pattern is defined as three weekly closes of a stock price each within a 1% close of the previous week. A 3 weeks tight pattern and sometimes it could be 4 weeks depending on the overall market indicates the stock is trading at a tight price range on low volume ideally, this action points to institutional support.


If you are new to investing, I want you to read the definition of a 3 weeks tight pattern again and again until you fully memorise and understand it, why? This simple pattern can be the difference between you making or losing money in the stock market when done right by following a few simple rules set out below.


As a new trader you are bombarded with so many trading strategies and techniques that you end up confused and losing money, if all you do was to pick one strategy like a 3 weeks tight Pattern or any strategy that you resonate with you and focus purely on learning, researching, back testing this strategy until you comfortable enough to start trading with it then you are way ahead of 90% of new traders out there that try everything new out there and end up losing money.


Let us look at a recent example of a 3 weeks tight pattern had you been looking out for could have made you a lot of money.

APPLE Inc



Apple went on to move from an entry point of $431.46 (add 10cents to the price of the highest bar within the 3 weeks pattern) to $545.17 where it presently at that is a huge $113.71 move in 6 weeks!

Another example is Visa,Inc





RULES FOR 3 WEEKS TIGHT PATTERN


  1. Price must clear the buy point on strong volume before initiating a position, do not buy just because you have seen a 3 week pattern form.

  2. Volume on break out must be above 40% above average or greater than the last 6 weeks at least.

  3. General market must be in a confirmed uptrend, do not buy if market is in a correction phase.

  4. Avoid thinly traded stocks or stocks that trade under 500,000 shares daily.



The markets has had a good run since October last year and many leading stocks are extended beyond their buying range, a 3 week tight pattern offers a secondary entry point for investors, on my watchlist this week are a couple stocks that may fall in this category, such as

Alexion Pharmaceuticals Inc


F5 Network Inc


Charts from finviz.com.


Happy Trading


John O.


Please post comment or questions below





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