Page 118 - THE MARKET WHISPERER

116 PART 4 - The Char t: Money ’s Footprint

me from showing a longer period. However, when I spread the trading
platform across my computer screen, the chart is spread across a larger
surface and allows me to clearly discern the candles for at least nine
months, which is precisely what I would like you to do when you examine a
stock. With Altria, I noticed a sharp increase in price lasting for eight days
of trading [1] and several days of consolidation [2] around this peak area.

This is one of the technical formations that traders love, and is called
the “bull flag.” The term derives from the rise in price [1] that looks like the
flagpole, and then the stable holding of this price, the consolidation, which
looks like the flag itself. The term “bull” means it will charge forward.
When people are “bullish” on a stock, they expect it to go up.

In this case, we will want to buy Altria if it goes higher than the top part
of the bull flag: this increase is known as a “breakout.” In other words, we
will buy Altria if its price goes over $21.50. The accepted way of presenting
this planned trade is as follows:

MO>$21.5
One of the reasons that Altria’s formation appeals to me is the fact that
in yesterday’s trading, the market dropped sharply by 3%, whereas Altria,
as you can see by the consolidation around the flag [2], held up well for its
higher range of prices and was not drawn down with most of the market.
Before making my final decision on whether to buy, I want to know a
little more of Altria’s history. To do that, I will change the chart display to
“weekly.” Each candle will now represent one week of trading, and I will
observe the stock’s behavior over a two-year period:

Altria, MO – Weekly Japanese Candle Chart for Two Years