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The “high tight flag” pattern is the rarest and most powerful chart pattern in the stock market. Coined by legendary growth investor William O’Neil, the high-tight flag occurs when a stock doubles or more in price in a short period (8 weeks or less). Per O’Neil’s rules, it should correct by no more than 20-25% after the move after the stock has doubled.
It may seem preposterous to buy a stock after such a large move, but the rare high-tight flag pattern has produced some of the biggest winners over the years. For example, Qualcomm ((QCOM - Free Report) ) gained 2000% after breaking out of a classic high tight flag pattern in 1999.
Image Source: Zacks Investment Research
What Causes a High Tight Flag Pattern?
Like any superstock, rapid, multi-bag advances are simply the sum of immense buying pressure in that particular stock. However, what drives successful high-tight flags is something fundamentally new in a stock – a drastic and positive change. For example, in 2004, Taser, now Axon Enterprise ((AXON - Free Report) ), saw its earnings soar as non-lethal weapons gained popularity in police precincts nationwide. Taser’s earnings were so spectacular that the stock had two consecutive high tight flags and ran from a split-adjusted $.60 to $60 from 2003 to 2004.
Image Source: Zacks Investment Research
In 2016, Advanced Micro Devices ((AMD - Free Report) ) broke out of a classic high-tight flag pattern. In this case, the driving force was that AMD’s chips were beginning to be used in everything from gaming to Bitcoin mining. The stock broke out at ~$8 and never looked back. Currently, shares are trading at $122.
Image Source: Zacks Investment Research
Is First Citizen’s Forming a High-Tight Flag?
The crisis in the regional banking sector has claimed several banks already and has decimated several in the SPDR Regional Banking ETF ((KRE - Free Report) ). However, crisis has mutated into opportunity for JP Morgan ((JPM - Free Report) ) and First Citizen’s Bancshares ((FCNCA - Free Report) ).
After news broke that Silicon Valley Bank was going under, FCNCA saw its shares plummet. That said, the weakness did not persist for long. In a “sweetheart deal” on March 27th, the company announced that it had entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase the company’s assets. First Citizen’s gained $110 billion in assets ($56 billion in deposits and $72 in loans) in the deal. To stabilize the banking sector, the FDIC chipped in with a massive $35-billion loan. Investors cheered the news sending shares rocketing by more than 50% in the session alone.
Since the purchase, analysts see a sea change in FCNCA’s earnings picture.
Image Source: Zacks Investment Research
Because of the strong earnings expectations, FCNCA ranks in the top 5% of the 4,000+ stocks tracked by Zacks and earns the best possible Zacks Rank #1 (Strong Buy).
Technical View
The strength from the news announcement in March until May was enough to build a first high tight flag (the stock is up 30% since breaking out of the initial pattern). Like the Tesla precedent, FCNCA is forming a second high-tight flag. Investors wanting to trade the pattern should look for shares to break over resistance around $1320. Could massive earnings in early August be the catalyst?
Image Source: Zacks Investment Research
Conclusion
High-tight flag patterns are extremely rare and powerful. Typically, a major fundamental catalyst or industry change is driving the underlying demand for the stock. First Citizens Banc is an example of a company currently etching out the rare pattern.
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High-Tight Flag: A Rare & Powerful Pattern
The “high tight flag” pattern is the rarest and most powerful chart pattern in the stock market. Coined by legendary growth investor William O’Neil, the high-tight flag occurs when a stock doubles or more in price in a short period (8 weeks or less). Per O’Neil’s rules, it should correct by no more than 20-25% after the move after the stock has doubled.
It may seem preposterous to buy a stock after such a large move, but the rare high-tight flag pattern has produced some of the biggest winners over the years. For example, Qualcomm ((QCOM - Free Report) ) gained 2000% after breaking out of a classic high tight flag pattern in 1999.
Image Source: Zacks Investment Research
What Causes a High Tight Flag Pattern?
Like any superstock, rapid, multi-bag advances are simply the sum of immense buying pressure in that particular stock. However, what drives successful high-tight flags is something fundamentally new in a stock – a drastic and positive change. For example, in 2004, Taser, now Axon Enterprise ((AXON - Free Report) ), saw its earnings soar as non-lethal weapons gained popularity in police precincts nationwide. Taser’s earnings were so spectacular that the stock had two consecutive high tight flags and ran from a split-adjusted $.60 to $60 from 2003 to 2004.
Image Source: Zacks Investment Research
In 2016, Advanced Micro Devices ((AMD - Free Report) ) broke out of a classic high-tight flag pattern. In this case, the driving force was that AMD’s chips were beginning to be used in everything from gaming to Bitcoin mining. The stock broke out at ~$8 and never looked back. Currently, shares are trading at $122.
Image Source: Zacks Investment Research
Is First Citizen’s Forming a High-Tight Flag?
The crisis in the regional banking sector has claimed several banks already and has decimated several in the SPDR Regional Banking ETF ((KRE - Free Report) ). However, crisis has mutated into opportunity for JP Morgan ((JPM - Free Report) ) and First Citizen’s Bancshares ((FCNCA - Free Report) ).
After news broke that Silicon Valley Bank was going under, FCNCA saw its shares plummet. That said, the weakness did not persist for long. In a “sweetheart deal” on March 27th, the company announced that it had entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase the company’s assets. First Citizen’s gained $110 billion in assets ($56 billion in deposits and $72 in loans) in the deal. To stabilize the banking sector, the FDIC chipped in with a massive $35-billion loan. Investors cheered the news sending shares rocketing by more than 50% in the session alone.
Since the purchase, analysts see a sea change in FCNCA’s earnings picture.
Image Source: Zacks Investment Research
Because of the strong earnings expectations, FCNCA ranks in the top 5% of the 4,000+ stocks tracked by Zacks and earns the best possible Zacks Rank #1 (Strong Buy).
Technical View
The strength from the news announcement in March until May was enough to build a first high tight flag (the stock is up 30% since breaking out of the initial pattern). Like the Tesla precedent, FCNCA is forming a second high-tight flag. Investors wanting to trade the pattern should look for shares to break over resistance around $1320. Could massive earnings in early August be the catalyst?
Image Source: Zacks Investment Research
Conclusion
High-tight flag patterns are extremely rare and powerful. Typically, a major fundamental catalyst or industry change is driving the underlying demand for the stock. First Citizens Banc is an example of a company currently etching out the rare pattern.