I just saw an IBD article about a pattern called the ‘short stroke’ (oh the jokes I can think of about that name, but since this is a family-friendly site let’s move on…) They describe the pattern on a weekly chart but I went and looked at the daily chart of the example they gave and in that case the daily chart shows a pennant/flag pattern. But the description of what’s taking place during this pattern is what’s really important:
The short stroke totally differs from a cup-with-handle (which in most cases must be at least seven weeks long), a flat base (five weeks) or an ascending base (nine to 16 weeks). But it can serve as yet another juncture where an investor typically can add a small amount of shares to a winning position.
After a strong run-up from its breakout point, a stock may trade in a tight weekly range as trade quiets to a murmur. The swing from the week’s high to low may be no more than a few percentage points. Viewed on a weekly IBD chart, it looks like a short stroke of a blue pen, hence its name.
The three-weeks tight pattern is similar to the short stroke in terms of price-and-volume action. But both patterns carry the same message: Institutional investors, such as banks and mutual funds, are reluctant to sell their shares despite having a big gain in the stock. [read the entire article...]
