价格形态百科-旗形(2).doc

14、Flags and PennantsRESULTS SNAPSHOTFlagsAppearanceA short sloping rectangle bounded by two parallel trendlinesReversal Or ConsolidationShort-term (up to 3 months) consolidationFailure Rate in Uptrend13%Failure Rate in Donwtrend12%Average Rise in Uptrend19%, with most likely rise being 20%Average Decline in Downtrend17%, with most likely decline being 15%Volume TrenddownwardPullbacks20%Throwbacks10%Percentage meeting predicted price target in uptrend63%Percentage meeting predicted price target in downtrend61%See alsoRectangle Bottoms; Rectangle TopsPennantsAppearanceA short sloping triangle bounded by two converging trendlinesReversal Or ConsolidationShort-term (up to 3 months) consolidationFailure Rate in Uptrend19%Failure Rate in Donwtrend34%Average Rise in Uptrend21%, with most likely rise between 15% and 20%Average Decline in Downtrend17%, with most likely decline being 25%Volume TrenddownwardPullbacks17%Throwbacks16%Percentage meeting predicted price target in uptrend58%Percentage meeting predicted price target in downtrend52%See alsoTriangles, Symmetrical Bottoms; Triangles, Symmetrical Tops; Wedges, Falling; Wedges, RisingFlags and pennants look alike and in many ways their performance is similar, too. The formations are usually very short in duration, from a few days to 3 weeks, and mark the halfway point in a quick price move. These formations can be profitable short-term investments, but you must be nimble and attentive to take full advantage of them. Pennants, with a failure rate of 34% in downtrends, are above the 20% rate I consider acceptable. Flags at 12% to 13 % and pennants in a uptrend (19%) perform better.旗形和三角旗形外观类似，性能也类似。它们周期相当短，1天到三周，是快速价格运动的中继。短期操作可以获利，但是三角旗形在下跌趋势中失败率相当高，34%。The percentage of formations that meet or exceed their predicted price targets is disappointing for both flags and pennants. I view values above 80% to be reliable, but the results show values that range from 52% to 63%, suggesting that you should trade these formations with caution as your profits may not be as large as you expect.目标价格达成率非常让人失望，所以不可奢望太高收益。The most likely rise or decline is deceptive for these formations. When the likely rise or decline value is above the average, it simply means that a frequency distribution shows more hits at a particular value, but the bin totals of the prior columns are high, pulling the average downward.TourFigure 14.1 shows a good example of a flag. It is bounded by two parallel trendlines and usually is less than 3 weeks long (sometimes as short as a few days). You see these formations appearing in strong uptrends or downtrends (such as that shown in Figure 14.1), usually near the halfway point in the move. This particular flag goes against the grain in the sense that prices rise in a downtrend. This is the most common behaviora retrace in a downtrendbut it is not unusual for flags to appear horizontal (as short rectangles) or slope downward (following the trend). Since flags can also appear in an uptrend, they usually slope downward, but can be horizontal or slope upward too.旗形是两条平行的趋势线，它们可能倾斜向任何方向，也可能水平。The volume trend is downward. As we see in the Statistics section of this chapter, a receding volume trend usually accompanies flag formations. Figure 14.2 shows what a pennant looks like. The only visual difference between a flag and a pennant is the shape of the formation. Two sloping trendlines that eventually meet outline a pennant formation, resembling a small wedge. Sometimes the trendlines slope upward, as in Figure 14.2, and sometimes they do not. Usually, they slope upward in a downtrend and downward in an uptrend. Like the flag formation, the volume pattern recedes. For pennants, the receding volume trend is more prevalent, occurring in nearly all the formations in this study.成交量是下降趋势的。Identification GuidelinesTable 14.1 outlines the identification characteristics for flags and pennants. Two parallel trendlines bound die price action for flags as shown in Figure 14.3. Two converging trendlines outline the boundaries for pennants as shown in Figure 14.4. In both figures die formations are short compared with many other chart patterns in this book. In die case of Figure 14.3, the formation is 12 trading days long, whereas the pennant in Figure 14.4 is just 8 trading days long. Many times when a formation is very short, such as 3 or 4 days, it appears as a horizontal rectanglea dark blob in die middle of a fast price trend. The formations usually are shorter than 3 weeks but this is an arbitrary limit. Sixteen formations in this study (6%) have durations greater than 3 weeks (the longest flag is 32 days and the longest pennant is 28 days). 旗形持续时间短！Reliable flags and pennants appear during steep, quick price trends. The trends might be up or down, but prices rise or fall quickly, moving several points in just a few days to a few weeks. In Figure 14.3, for example, the downtrend begins on January 18 and the flag begins on February 1. In that short time, prices tumble from a high of 40 3/4 to a low of 30 1/8. Although one might argue the uptrend in Figure 14.4 begins in early April, I suggest the rise leading to the pennant begins later, on April 26, from a low price of 22 3/8. Six trading days later, the price climbs to the top of the pennant at 31 3/4. The later starting point is after the two minor highs and it serves as a reference point for the measure rule.旗形出现在快速的价格移动中比较可靠！Figure 14.3, the price trend in die flag slopes upward, whereas in Figure 14.4 the pennant slopes downward. This behavior is typical for the prevailing price trend (that is, flags or pennants typically move against the trend). The chart patterns usually appear near the midpoint of the move. As such, they are often termed half-mast formations.The volume trend nearly always recedes over the course of the formation. However, this is not an inviolate rule but usually is the case. I should point out that rising volume is no cause for alarm. Of the 45 formation failures, only 4 have rising volume trends.When selecting a flag or pennant to trade, the most important guideline is the rapid, steep price trend. If prices are meandering up or down and form a flag or pennant, then look elsewhere. The flag or pennant must be a place where the stock can take a breather from its rapid pace. Prices move against the short-term trend for several days before continuing on.Focus on FailuresLike all formations, flags and pennants are not immune to failure. Figure 14.5 shows a flag failure. The flag, while obeying the confines of the two downsloping trendlines, has a good volume trend. Prices should continue higher after the flag completes but do not. Why? One explanation is that the formation is just too long at 26 days. Sometimes an excessively long formation suggests an impending failure or a weak price move (after the breakout). Trade flags or pennants more than 3 weeks long carefully or pass them up entirely.图14.5中旗形，拥有两条下降的平行趋势线，有很好的成交量走势，为什么价格没能继续上涨？一种解释是形态持续时间太长。Figure 14.6, another flag formation, is also a failure. Prices should continue rising after the flag completes. The duration is good, at 10 days (about average for flags), and the volume trend is downward. However, the formation has an inadequate price rise leading to it. The difference between the take-off point and the formation high is just over a dollar, well short of the 19% average rise. There is probably little danger that you would select this formation to trade. Since flags and pennants signal the halfway point, the predicted rise in this example is just too small to take advantage of. An investor viewing this formation for trading would likely pass it by.图14.6是另一种失败的例子，它的问题在于前期的价格走势太弱。出现在强势的价格走势中的旗形才比较可靠。Figure 14.7 shows a failure of a pennant in a downtrend. The formation probably reminds you of a short symmetrical triangleone that acts as a reversal (which is unusual for a symmetrical triangle). The volume trend is receding, as you would expect. The formation price trend, bounded by the two sloping trendlines, looks good too. The price trend leading down to the formation represents an 18% decline, exactly the average for a pennant in a downtrend. Prices should continue moving lower after this formation completes but they do not. Why? You can see in Figure 14.7 that prices loop around the formation end then head lower (a throwback). If you held onto your short position, you would eventually make money. However, I still classify this formation as a failure. Prices should continue down immediately after piercing the trendline boundary. The reason prices ascend immediately is not clear. A scan of the database reveals 66% of the formation failures (30 out of 45) fail in this manner. That is to say, they move briefly in the wrong direction (a breakout failure) but soon turn around (by throwback or pullback) and complete properly.旗形的失败案例66%是图14.7的情况，价格向上突破，然后掉头下跌。虽然最终还是下跌了，但是突破方向反了。Trading TacticsTable 14.5 shows trading tactics for flags and pennants. Consult Figure 14.8 as I review the tactics listed in Table 14.5. The measure rule gauges the minimum price move. It is the same for both flags and pennants. First, determine where the trend begins, which is usually the minor high (for downtrends) or low (for uptrends) preceding the formation. Figure 14.8 shows the trend beginning at point A. Subtract the low at the formation start (point B at 42 3/4) from point A (47/z), giving a difference of 43/4. Subtract the difference from the high at the formation end (point C at 43) to give the target price of 381/4. Prices reach the target 13 trading days after they move below the formation trendline. When trading flags and pennants, you must first be sure you have a valid formation. Use the identification guidelines outlined in Table 14.1 to ensure that you have correctly identified a flag or pennant.Use the measure rule to gauge the amount of profit likely from the trade and weigh the amount of profit against the possible risk of failure. Look for support and resistance levels where price trends were repulsed in the past. Many times prices will pause or turn around at these junctions. These values become the risk points for a trade. You can compare the risk with the reward by computing the current price with the measure rule target and the first or second level of support or resistance. A ratio of reward to risk should be four to one (or higher) for highly profitable trades.For the stock shown in Figure 14.8, the potential reward is 43/4 (that is, 43- 38V4). The first resistance level is at 44 and there is another at 45 (assuming the trade goes against you and prices rise). The risk is one or two, that is, 44 - 43 or 45-43. The ratio, at 4.75 to 1, suggests this formation is worth trading, providing you limit your losses. A stop placed at 44V8 or so, slightly above the first resistance level, works well.Take a position in the stock after a breakout, once prices move outside the formation boundary. As prices near the target price, as predicted by the measure rule, consider closing out the trade. Since the statistics regarding the success of meeting the predicted price target are so poor for these formations, be ready to close out the trade sooner than expected. If you wait for prices to reach the target, you might turn a profitable trade into a losing one.Sample TradeFor example, let us say you are considering shorting the stock shown in Figure 14.8. Since the price trend is downward and it is a flag formation, the statistics suggest that 61% of the formations will meet their price targets, on average. That is a poor showing and deserves caution.As die chart pattern forms, you monitor the price closely by not only charting the end-of-day price but also checking it at midday. When you dial into your broker for a midday price quote and discover that prices have moved outside the bottom trendline, you decide to pull the trigger. You sell short and receive a fill at 42, just above the closing price of 41 /2.You follow the stock closely as prices decline. You look back through the prior years trading history and discover two support levels at about 40 and 39. You believe, and hope, that the stock will fall through the first support level but the second one may be more difficult. It is, after all, closer to the 38/4 target price and more robust than the first level.When the stock moves sideways at the first support level, you check your work and reexamine the fundamentals and technical indicators. Everything seems good so you remain in the trade.Eventually the stock pierces the first support level and declines to the second one, where it gets stuck. It closes at 39 but the next day moves up. So the following day you decide to close out your position, believing that the risk of a price rise now far exceeds the possible gain. Your short sale covers at 39 and you receive almost $3 a share. That is not a bad profit for a hold time of just 2 weeks. On an annualized basis, the return is . wonderful!15、Flags, High and tightRESULTS SNAPSHOTAppearanceA consolidation region of several days to several weeks long after a stock doubles in priceReversal Or ConsolidationShort-term (up to 3 months) bullish consolidationFailure Rate32%Failure Rate if waited for breakout17%Average Rise63%, with most likely rise between 20% and 30%; 44% have gains over 50%Volume TrenddownwardThrowbacks47%Having recently completed the chapter on flags and pennants, I was surprised to discover an abundance of high, right flags. Even more surprising is their performance. The 32% failure rate is poor, but if you wait for an upside breakout, the rate drops to 17%. Reliable formations have failure rates below 20%, so high, tight flags score well providing you wait for the breakout.The average rise, at 63%, is among the highest I have seen for any formation. A frequency distribution suggests that die most likely rise is a more sedate 20% to 30%. However, 33% of the formations have gains over 90% and 44% have gains above 50%. A 50% gain in about 2 months is a formation worth exploring!TourFigure 15.1 is a classic example of a high, tight flag. The quick rise from the low point at 14 to the flag high at 303/4 takes less than 2 months. The volume trend is downward throughout the formation. After the slight pause, the stock continues rising. In another 2 months, it reaches a peak of 120. The high, tight flag is a play on momentum. When a stock doubles in a short time, it usually takes a breather and consolidates. When it does, it gives the trader the opportunity to buy the stock before the rise resumes. How do you correctly identify a high, tight flag?Identification GuidelinesThe phrase, high, tight flag is a misnomer as the formation usually does not resemble a flag formation at all. Sometimes prices move up slightly as the flag progresses, such as shown in Figure 15.1, but more often prices spike down briefly (a day or two) then return and move downward or horizontally before breaking out and heading up.The formation was popularized by William J. ONeil in his book, How to Make Money in Stocks (McGraw-Hill, 1988). In his brief introduction to the formation, he identifies many characteristics that high, tight flags share. Table 15.1 lists them. ONeils description is quite specific but it is interesting for what is does not say. He does not mention that prices should be moving horizontally for an extended time before the stock doubles. Some have said that this is a prerequisite, yet the charts accompanying the ONeil text show at least one stock in a steady uptrend well before the 2-month rise to the flag begins. The chart shows a price low of about 26 while the flag forms at nearly 100.I view this extended price rise as a key. It suggests that you need only look for a stock that doubles in 2 months, then consolidates. By extension, you could have a stock double, consolidate (forming a high, tight flag), then double and consolidate again, forming another higher flag. I found several stocks in the database to which this situation applies. In my selections of this formation, I made no assumptions about the prevailing trend (in other words, the chart pattern need not form from a long, flat base).Some analysts suggest volume should trend downward during the flag phase then spurt upward when prices break out of the formation. Again, ONeil does not state this as a prerequisite and I do not consider it in my selection criteria. However, the statistics show a downward volume trend does improve performance.The last omission of interest is how to trade the formation. Presumably, once you spot a high, tight flag you would buy into the situation. Unfortunately, with a 32% failure rate, you may be taken to the cleaners on numerous occasions if you follow this approach. It is safer to wait for a breakout before trading this and most other chart patterns.How did I select the flags in this study? I programmed my computer to identify all stocks that have a minimum price rise of 100% in 2 months or less. Then I manually went through each stock and looked for a nearby consolidation region. If the region was close to the 100% price gain, then I accepted it as a high, tight flag. I ignored the flag duration and correction guidelines outlined in Table 15.1. The statistics later would show that these guidelines do contribute to performance but only to a minor degree.Figure 15.1 passes all the ONeil guidelines, whereas Figure 15.2 does not (if you apply them strictly). The stock in Figure 15.2 reaches a low of 5/4 in early July then starts moving up. In early September, it reaches a price of 10/4, just shy of doubling. Admittedly, the 95% price gain is less than a strict interpretation