Bullish Chart Formations
By: Ray Frazier
The following is an excerpt from Ray Frazier's Huge Profits Now!!
Bullish Flat Base Formation
The flat base formation is the most basic and most common chart formation. It is seen in the charts quite often. Though this formation is considered to be basic, very strong stock price movements to the upside can be gotten from this formation. There is no length of time that is required for this type of formation. The flat base can go horizontally for three days on up and can make huge price movements at anytime after going horizontal.
The key to finding the right flat base is to look at the volume as a stock price goes horizontal. Those flat bases that are more than likely to break the trend line will also have their volume dry up after going horizontal.
When the stock price finally breaks the trend line (resistance), there should be a very big increase in the volume. Otherwise, the move above the trend line could be a false breakout.
The chart below gives two examples of bullish flat base formations. You will note that with the first flat base the stock price hits resistance four times before breaking through. The stock gains ten dollars from the breakthrough price and the top price of the next day.
The second flat base formation only hits resistance twice, but the stock price in between remains in a tight price pattern. From the time the stock price crosses the resistance line the stock gains about fifteen dollars in two days and nearly doubles in value in two weeks.
Bullish Channel Formation
The bullish channel formation is also a basic chart formation and is very common. Generally this formation is considered a continuation of a previous trend in the stock price. The price pattern of a stock in this formation represents a constant struggle between the buyers and sellers of the stock (an even balance between the two forces). This struggle between buyers and sellers of the stock acts as an indecision area, which history shows will resolve itself in the direction of the previous trend more often than not. In the channel formation the stock price bounces between a specific low and a specific high price.
Unlike most formations, there is no volume dry up, although volume does seem to lessen a bit. However, when the stock breaks out of the formation, volume should increase very noticeably.
The chart below is an example of a bullish channel formation. Notice that the stock was in an uptrend prior to entering a channel, after which the stock gapped open by 20 points to cross the resistance line and continued to gain price value on volume.
Bullish Flag Formation
The flag formation is very dynamic in that it is usually a continuation of a prior big move in the stock due to some sort of company news. Investors hear the “good news” about the company and buy large blocks of stock. The stock price moves up strongly for two to four days on high-volume and then will take a breather. The buy point on such a formation is as the stock breaks through the downward trending resistance line. This type of “flag” is considered a bullish formation. There are both bullish and bearish flag formations.
Bearish flag formations occur during the correction of a stock. Corrections in a stock can occur due to “bad” news from the company or an overall market correction. Typically, the stock will be in a downtrend and attempt to turn around.
Just like a bullish flag formation, the bearish flag formation goes against the overall trend. The stock will make higher highs and higher lows between the parallel support and resistance lines that are trending upward. Eventually, the stock price will break the support line and continue its previous downtrend.
Below is an example of a bullish flag formation. As you can see, after the stock crosses the upper resistance line, the stock goes on to gain ten plus points before investors start taking some profits off the table.
