In my live webinar yesterday morning I told traders there were almost an unlimited number of ways to trade Carvana Co. (NYSE: CVNA).
The stock gapped up huge in premarket after announcing earnings…
But CVNA wasn’t trading over $50 because of the fundamentals or the good business model … It was breaking out because for about the last 2 months short sellers have been guessing tops.
And these squeeze setups have been one of the best setups since 2015…
That’s why I said you could google bullish chart patterns and then wait for any of them to present themselves in the stock for a potential trade.
But you don’t have to google them and waste a bunch of time researching…
Today I’m going to show you two bullish chart patterns that presented themselves in two big gainers yesterday — one of them was in CVNA.
These aren’t our typical morning dip and rips or VWAP hold, high-of-day breaks…
There are many other bullish chart patterns out there, so let’s dive right in so you can see if these chart patterns make sense to you so you can start looking for them today!
Bullish Chart Patterns Every Trader Should Know
There are so many patterns that can signal a potential trade — reversal patterns, continuation patterns, bullish or bearish patterns…
Since day traders hold positions for a short time, a lot of the patterns we look for present themselves on the intraday chart.
And all of them can signal potential entries. So let’s dive into what they look like…
The Flag and Pennant Patterns
Flags and pennants (think triangle flag) are powerful continuation patterns.
They can be bullish or bearish and can represent a pause in momentum before the stock resumes its trend.
This setup typically occurs after a significant price surge to the upside that represents the flag pole…
Then the stock experiences a brief consolidation, forming a flag or pennant-like shape on the chart, before resuming its trend.
We saw a bullish pennant in Recursion Pharmaceuticals, Inc. (NASDAQ: RXRX) as part of its breakout yesterday…
The morning spike represents the flag pole, then the consolidation between $14.80 and $15.70 slowly tightens to create a pennant flag … Then the stock breaks out of consolidation and continues to the upside.
RXRX chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
Watch Bryce Tuohey explain how he trades flag patterns like this here.
See more examples of bull flags and pennants here.
Double-Bottom Pattern
The double-bottom pattern signals a trend reversal.
The price falls, finds support, and rises. It later tests the support again and bounces back up.
This is a crucial level to watch for potential entries for trades.
We saw this pattern play out in CVNA yesterday morning…
CVNA chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
The stock pulled back at the open then bounced. Then it reversed and retested the support level again and bounced close to the high of the day.
It might look like a small move on the chart, but after the double bottom around $48, the stock bounced to almost $56 for a $8 per share move.
So don’t get greedy and think a bullish or reversal pattern means the stock will continue to go up forever or break the high of the day.
Have realistic expectations for every trade.
See why managing your expectations for a trade is crucial here.
After that double bottom, CVNA consolidated all day around VWAP. So we’ll see which way it goes today to see if there’s another potential trade.
If you want to follow along with me every morning — sign up for a free webinar here to see how you can get into Pre-Market Prep.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade