A Chinese Flag

A Chinese Flag

January 12, 2017 Off By Chuck

My second favorite pattern to enter in a stock is the bull flag. Because flags are viewed as half way consolidations, the higher and tighter it is the better.  My experience tells me when both exist, the higher the rate of success and the higher the upside.

Weibo (WB), a fast growing Chinese social media company, traded sideways within the blue boundaries for almost 2 years after it IPO’ed. As you can see in my chart below, it broke out in May and rose more than $120% in 5 short month. After creating a divergent overbought high, the stock has since pulled back and consolidated nice and orderly. While price has yet confirmed an end to the consolidation or breakout out of the flag, it is approaching its 200 day moving average which would be a likely place for it to find support.

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If WB should follow the traditional bull flag pattern, as a halfway pattern it presents one heck of an opportunity, something north of 100%. I probably don’t need to mention the inherent risks of international stock investing especially against the backdrop of a strongly rising dollar but those with a higher risk tolerance could find this a great addition to their portfolio.