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FLAGS AND PENNANTS


A Bear Flag For ManPower

03/29/07 10:30:15 AM
by Arthur Hill

A weak rally over the last few weeks for a bear flag for ManPower and weak volume flows point to a downside break.

Security:   MAN
Position:   Sell

Flags are consolidation patterns that follow a directional move. After a decline, a bear flag slopes up and represents a corrective bounce. After an advance, a bull flag slopes down and represents a correction or pullback. ManPower (MAN) has an upward-sloping bear flag working over the last few weeks. The stock declined sharply in late February 2007 and early March. MAN then found support around 71–72 and worked its way back above 76 the last few weeks. The advance looks like a rising flag flying at half mast, and a break below 73 would signal a continuation of the prior decline.

Flags are said to fly at half-mast on certain occasions, and when this occurs in chart formations, that means the flag forms near the midpoint of the move. The first move down was around 5.5 points from the trendline break to the early March low. A similar move from the flag break would project a decline to around 67.5 (73 - 5.5 = 67.5). See Figure 1.

FIGURE 1: MANPOWER, DAILY. The advance looks like a rising flag flying at half-mast, and a break below 73 would signal a continuation of the prior decline.
Graphic provided by: MetaStock.
 
Low volume and weak Chaikin money flow (CMF) reinforce the corrective nature of this advance. Volume during the entire advance was well below average, and this shows weak buying pressure. In addition, Chaikin money flow moved from positive territory to negative territory over the last three weeks. The CMF was actually quite strong in early March, and the move into negative territory shows quiet selling pressure (distribution).

Should MAN break below 73 and confirm the flag, I would then watch the resistance zone around 75–76 for a failed signal. There is a trendline extending down from the February high, and this marks resistance around 75–76. A move above 76 would break this trendline and negate a bearish signal.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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Date: 03/29/07Rank: 4Comment: 
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