Prudential Financial PRU Bull Flag Example

Sep 3, 2008: 7:43 PM CST

Financial stocks have been showing relative strength as of late during the recent market rally.  I wanted to call attention to Prudential Financial Securities (PRU) to show a classic example of a Bull Flag measured move example worth nothing.

Prudential Financial (PRU) Daily Chart:

Price formed a positive momentum divergence on the July 15th lows as evidenced by the oscillator (which often precedes price reversals) but again we can’t know how powerful a move will occur off divergence signals.  In this case, strong momentum pushed price to new momentum highs but not new price highs for the year.  The price high is closer to $92 per share, which was achieved right at the start of 2008.

Nevertheless, following the large momentum impulse, price retraced to the 38.2% retracement of the July 15th move to find support at the 50 day EMA, setting up the “Impulse Buy” trade or in this case, a “Bull Flag” or measured move.  It was also roughly the 50% retracement of what I’ve considered as the “flag” portion (the move from $62 to $76 per share – a $14 move).

Generally, for the best bull flags, you want to find a confluence of support at a key moving average (usually the 20 period EMA) and also a Fibonacci retracement, usually the 50% retracement.  This will increase your odds of a successful trade, and also allow you to take a potentially larger position as a result of a tighter stop.

Volume declined as the flag potion developed, adding confidence to the pattern resolving as expected.

Entry was taken as price broke above the upper trendline, and the target is an equal or “Measured Move” of the prior impulse (added to the bottom of the trend channel for conservative price projection).

A $14 move off the roughly $70 support projects price to complete the flag (measured move) pattern at roughly $84 per share – keep in mind these prices are rough estimations, and not exact numbers.

It’s important to note and categorize ideal chart patterns so that you’ll be more likely to recognize and act upon them in real time, potentially adding to your trading edge.

5 Comments

5 Responses to “Prudential Financial PRU Bull Flag Example”

  1. Richard Says:

    Prudential, PRU , rose to 79.50 which is near resistance at 80.50 as Associated Press reported that the insurance sector advanced after Hurricane Gustav passed through the Gulf of Mexico without inflicting massive damage — and the sky-high insurance claims that would have resulted.

    Prudential’s rise is actually a pop in a bear market that is to be sold, if one follows my investment maxim: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength.

    When I look at the MSN Finance ongoing chart of PRU, VTI and QQQQ, it looks to me like the bear market picked up steam on August 15, 2008.

    So the investment application is a sell of Prudential.

    The Yahoo Finance 5 day ongoing chart of PRU IYF KIE and IAK shows Prudential’s pop.

    And The MSN Finance ongoing chart of PRU, IYF, KIE, and IAK shows Prudential’s pop as well.

    Yes definitely sell, like immediately, like tonight when trading is low.

  2. Man4urheart Says:

    I read your blog daily. Nice analysis!. I invest in Indian market but take cues from your analysis for DOW and S&P movement!

    Wondering! if you can present your view on Steel charts?

  3. Mark Says:

    Corey, can you take a look at the 3 year copper chart? I see an ascending triangle setting up but we are looking as if we may break out lower from that range. When a stock (or commodity in this case) breaks lower from an ascending triangle, what does that mean? Is the chart then broken?

  4. Corey Rosenbloom Says:

    Man4u – I planned to do an analysis of steel but today’s market action prevented that. I’ll try to do that by this weekend. Good question and thank you for reading.

  5. Corey Rosenbloom Says:

    Mark,

    I posted today on the Copper triangle per your request.

    A slight penetration is ok but a clean break beneath is not. What we have appears to be a slight break and a battle for that level. It appears it *could* hold for the time being but if not, then yes, we would have a confirmed break-down and would have downside price objectives. As of this writing, the structure is still in tact.