Cup-Without-Handle Chart Pattern Can Yield Stellar Gains
As noted in the past two Investor's Corner columns , the cup-with-handle pattern has been a launching pad for big winners for decades.
The handle area is where the last remaining feeble shareholders get shaken out, paving the way for a powerful breakout. It's good action to see after a stock builds the right side of a base, but it's not mandatory. Plenty of big market winners have broken out of cup-shaped bases without first forming a handle area.
A sound cup-without-handle should still have the same traits as a cup-with-handle base.
Check The Cup
First, it should be at least six weeks long. The correction on the left side should not exceed 35% from intraday high to low. When the right side of the base forms, heavy institutional buying should occur. Look for accumulation weeks — basically, weekly gains in above-average trade or sharply higher weekly volume.
If there are tight weekly closes at the bottom of the base, even better. Finally, look for visual symmetry in the base. The right side of a base should generally take as long to form as the left side did.
"Straight up from the bottom" is often viewed as a technical flaw but that's not what happens when a cup-without-handle pattern forms. The pattern should have symmetry just like the cup-with-handle pattern. Straight-up-from-the-bottom moves often result in lopsided bases where the left side took much longer to form than the right side.
Qihoo 360 Technology (QIHU) has been a standout performer since its IPO in April 2011 at 14.50. It's also No. 2 in Monday's IBD 50.
It cleared a cup-without-handle pattern in May 2013. At the time, the company showed torrid revenue growth. Wall Street was optimistic about growth prospects and the company's ability to take share of China's search market from Baidu (BIDU).
Qihoo gave accumulation signs as it formed the right side of its base. During the week ended April 19, shares jumped 6% as weekly volume rose considerably from the prior week (1).
Qihoo rose for two more weeks before breaking out, shooting past the 35 buy point. Weekly volume totaled 16 million shares, well above its 10-week average at the time of 9.3 million. The Composite Rating was 96.
Qihoo made a monster move after that, rising for 13 straight weeks at one point. It's since formed a new base.
The handle area is where the last remaining feeble shareholders get shaken out, paving the way for a powerful breakout. It's good action to see after a stock builds the right side of a base, but it's not mandatory. Plenty of big market winners have broken out of cup-shaped bases without first forming a handle area.
A sound cup-without-handle should still have the same traits as a cup-with-handle base.
Check The Cup
First, it should be at least six weeks long. The correction on the left side should not exceed 35% from intraday high to low. When the right side of the base forms, heavy institutional buying should occur. Look for accumulation weeks — basically, weekly gains in above-average trade or sharply higher weekly volume.
If there are tight weekly closes at the bottom of the base, even better. Finally, look for visual symmetry in the base. The right side of a base should generally take as long to form as the left side did.
"Straight up from the bottom" is often viewed as a technical flaw but that's not what happens when a cup-without-handle pattern forms. The pattern should have symmetry just like the cup-with-handle pattern. Straight-up-from-the-bottom moves often result in lopsided bases where the left side took much longer to form than the right side.
Qihoo 360 Technology (QIHU) has been a standout performer since its IPO in April 2011 at 14.50. It's also No. 2 in Monday's IBD 50.
It cleared a cup-without-handle pattern in May 2013. At the time, the company showed torrid revenue growth. Wall Street was optimistic about growth prospects and the company's ability to take share of China's search market from Baidu (BIDU).
Qihoo gave accumulation signs as it formed the right side of its base. During the week ended April 19, shares jumped 6% as weekly volume rose considerably from the prior week (1).
Qihoo rose for two more weeks before breaking out, shooting past the 35 buy point. Weekly volume totaled 16 million shares, well above its 10-week average at the time of 9.3 million. The Composite Rating was 96.
Qihoo made a monster move after that, rising for 13 straight weeks at one point. It's since formed a new base.
Read More At Investor's Business Daily: http://education.investors.com/investors-corner/689496-cup-without-handle-pattern-can-yield-big-gains.htm#ixzz2t9Ou1m7W
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