Now That's What I Call A Bull Flag!

CV Therapeutics

Here I am, paper trading away and frankly not finding anything terribly interesting as my flag trades mostly fail to develop. However, I'm taking comfort from the fact that this is exactly as Guy Cohen has said it will be in this uncertain market.

So my early successes in November where my trading fund increased by 30% during one month have rather petered out with no real movement since then.  The good thing, of course, is that the trades I have placed have simply not been triggered either so I have no losses.

On the 27th, Guy's Tradefinder software picked up CV Therapeutics (CVTX) which looked promising.  At least it had those positive, thrusting bars that Guy refers to with a succession of lower highs as the price fell away.  So I set my Buy Limit and Stop orders as per the instructions and it became the sole occupant of my Flag-Trader watchlist as the others had all faded away.

My main concern was whether, if it moved on up, it could break through the resistance around 1200 from previous high of Sep 08.

This morning I opened up TC 2000 and ran the Update to get the latest data and ran the Flag-Trader Tradefinder again to find any new candidates.

Then I checked my watchlist – and thought that something had gone wrong with the data uppdate as I looked at the CV Therapeutics flag. It took me several moments to realise the stock price had gapped up into the top right corner and I wasn't even looking in the right place.

I bought in at 1185 and it closed at 1542.  That's a 357 point gain in one day – or is it?   Unfortunately, my joy was shortlived as I realised that by gapping up over my Buy Limit order (a Limit order being an instruction only to execute the trade if it is within the limits I specify, in this case the single price of 1185) the trade would not be executed.

This situation is, in fact, covered in the Flag-Trader instruction CDs.   In fact, the only way over it is to place the order during market hours – so although technically effective that would mean having prior knowledge of the coming gap, an unlikely situation, and it doesn't fit in with the relaxed trading style of Flag-Trading.

Looking at the news I see that the company has been the subject of an aggressive takeover offer that explains the jump.  I've tried to tie the movements of the preceding days to news announcements but they don't really seem to tie up – and like most private traders, I've got other things to do and don't have the time to go into the detail.

I really don't mind the reason, the fact is that the Flag-Trader method worked well by demonstrating that it would catch a big move like this with minimum time and effort on my part.  It was just unfortunate that the move was actually so abrupt that the technicalities of the markets orders would have prevented it paying off.

Reading Guy Cohen's latest Alert for his subscribers I see he has been warning of the current earnings season during which there is likely to be more bad news to be absorbed by the markets leading to unsettled situation.  However, he expects things to settle down and then to see some good opportunities returning.  If they are anything like this one then I'm looking forward to it.

You obviously don't need many like this each month to generate a decent income from Flag Trader.