Basic Techniques  |  JAN 2006

Trading Flat Base Breakouts by Bill Pritchard

Stocks & Commodities V. 24:1 (46-49): Trading Flat Base Breakouts by Bill Pritchard Here’s a look at a simple stock-trading strategy that combines fundamentals and technicals. The flat base breakout pattern (FBB) is a stock market classic, a time-tested, proven winner. Of all the various patterns, nothing more clearly communicates sudden buying activity than the FBB. A trader who enters a position based on an FBB pattern will likely see profits within a very short time frame. Unfortunately, there are no guarantees in the stock market, and this pattern is no exception. However, by profiling past winners and using fundamental and technical analyses, you can improve your odds of success. By applying a dual exponential moving average† (EMA) as an exit signal, the FBB trader will exit with significant profits in most cases. For the purposes of this article, I will define an FBB as a stock the closing price of which is higher than its highest high over the previous 60 days. In addition, a visual inspection of the chart should show a flat or slightly angled price trend until the day that the FBB occurs. Price action prior to the FBB should be listless, with little volume or activity.

by Bill Pritchard