Finding flat bases and cups with handle
If you can identify such stocks in advance then you can anticipate an entry. Some people calculate complicated pivot points on such stocks down to few cents and put conditional orders at those points. If you see the Investors Business Daily weekly 85-85 list or IBD 100 list, they have such stocks with black border.
Similarly everyday Investor Business Daily in their NYSE Stocks in the News and NASDAQ stocks in the news page have 2 stocks which are first two in that list of stocks which usually have the ideal IBD patterns and also those stocks by IBD standards are ready to breakout.
Most of the time if you read carefully it will also have exact buy points mentioned. Every day I put those 4 stocks on watchlist and you will often find those stocks breakout within few days or in most cases on the day of their appearance. Similarly notice how many of the stocks which are black boxed in 85-85 or IBD 100 breakout on Monday.
Now one of the ways to use the base universe of 100 % plus movers to find flat bases and cup with handle is to just sort those stocks with 65 day price growth and take bottom 10%. If you go through that list of stocks you will find several flat bases and cup with handle in strongly up trending stocks.
So after doing the same on the 397 stocks up more than 100% from their low in 260 days, I got this list for next week of stocks to watch:
AKAM,Akamai Technologies Inc (Google Yahoo Earnings Chart)
AKH,Air France KLM (Google Yahoo Earnings Chart)
AMAG,Advanced Magnetics Inc (Google Yahoo Earnings Chart)
AMIE,Ambassadors Internat Inc (Google Yahoo Earnings Chart)
AXTI,Axt Inc (Google Yahoo Earnings Chart)
BRLC,Syntax-Brillian Corp (Google Yahoo Earnings Chart)
CBEY,CBeyond Communications Inc (Google Yahoo Earnings Chart)
FCGI,First Consulting Grp Inc (Google Yahoo Earnings Chart)
HHGP,Hudson Highland Grp Inc W/i (Google Yahoo Earnings Chart)
LBY,Libbey Inc (Google Yahoo Earnings Chart)
LNOP,Lanoptics Ltd (Google Yahoo Earnings Chart)
MAG,Magnetek Inc (Google Yahoo Earnings Chart)
MFB,Maidenform Inc (Google Yahoo Earnings Chart)
OVEN,TurboChef Technologies Inc (Google Yahoo Earnings Chart)
POZN,Pozen Incorporated (Google Yahoo Earnings Chart)
RBN,Robbins & Myers Inc (Google Yahoo Earnings Chart)
RIMM,Research In Motion Ltd (Google Yahoo Earnings Chart)
RVBD,Riverbed Technologies Inc (Google Yahoo Earnings Chart)
SOFO,Sonic Foundry Inc (Google Yahoo Earnings Chart)
TAR,Telefonica De Argentina (Google Yahoo Earnings Chart)
TRFC,Traffic.com (Google Yahoo Earnings Chart)
WRSP,WorldSpace Inc (Google Yahoo Earnings Chart)
Now if you go through the list it is full of stocks with flat bases and cups with handle. If you further narrow down the list by earnings or any other criteria you have 4-5 good candidates to anticipate entries on. So instead of buying a breakout after a stock has gone up 4% you can anticipate a breakout and enter with a pre defined buy stop. That way you can capture a part of the breakout move.
If you want to go even further in to microscopic details, then you can find out the required volume and price action for a breakout and break it down by hours or minutes and if you see a stock meeting that condition in first one hour of trading then you buy. So that you can benefit from the 5 to 10 dollars move in a stock on day of breakout. This can further reduce your risk on entry by reducing the distance from breakout price. That is how the list on first page of Investors.com is generated under the heading Stocks On The Move. The list is calculated by using hourly equivalent of the the percentage up or down in trading volume of a stock compared to its average daily volume over the past 50 days.(The average 50 day figure is divided by number of trading hours and given a certain weight for first few hours and when the trading volume exceeds that level, the stock appears on that list).
Another very microscopic detail which can help you fine tune your entries.
2 comments:
Thanks for the Investors.com link. Good stuff. I use Trade Ideas for the same purpose.
Pradeep- love your blog. Some great stuff here. If you get a second, read the latest post on my blog which references some of what you suggest. I would appreciate knowing if you think I'm on the right track.
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