The markets recent sell off has brought forth an abundance of the bear flag formations, which incline upward, the direct opposite of the bull flag. However they both are continuation patterns and the weakness as of late in many names and markets look like a dead cat bounce setting up the flags. The measured move of the flag will be to take the length of the flag pole and add that distance to the bottom of the flag to get your target. Below are a few examples, exactly how they appeared in our daily reports, to get you comfortable with recognizing the design. Anyone who would like a full copy of our Monday Game Plan email me at firstname.lastname@example.org.
In our Wednesday 9/21 Game Plan we looked at AMBA. The semi group has been slaughtered and this name is now 55% of recent all time highs. It broke below the round 70 number taking out the flag and is now lower by more than 11 handles from the highlighted entry. AMBA has declined 7 of the last 9 weeks and Friday it recorded a bearish engulfing pattern. The measured move is to the round 50 handle.
Stocks that can be viewed as shorting opportunities are AMBA. Once a stellar name in the group it is now 45% off recent all time highs even though it is up 41% YTD and 94% over the last one year period. Its last earnings report was a mess falling 8.5% on 9/2 and another 10.8% the following session undercutting its 200 day SMA. Prior reports rose 3.7 and 7% on 6/3 and 3/4 and a drop of 1.7% on 12/5. AMBA has been lower 6 of the last 8 weeks and there has been some big weekly losses of 23.9, 17.4 and 21.1% ending 9/4, 8/21 and 9/11. The stock met resistance at the round par figure on 8/31 and now sports a bear flag pattern. Sell stop to short below 69.70.