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Strategies & Market Trends : today's chart
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To: sean sanders who wrote (421)8/14/1997 10:34:00 PM
From: Bill Sandusky   of 1267
 
Hello Sean,

Trendlines are "subjective" as you suggest. TradeStation draws them automatically, essentially following Tom DeMark's methodology. A significant downtrend line starting at the high on 5/5 and "touched" on 6/4 and 7/8 was broken on 7/31(a strong positive). Volume increased significantly during the upmove from 10 1/2 (another positive). Money Flow also went positive as did momentum, both strong positives. Price stalled at the 14 area and then declined to "retest" the breakout at 12 1/8 (this occurs frequently and is perfectly normal). We actually brokeout today from the trendline connecting highs on 6/4 and 8/4 area with a close today of 14.062. Next immediate resistance point is the 5/5 high at 15.50. After that, we could be headed for the 18ish area.

The Cup & Handle formation is described in William J. O'Neil's book entitled "How to Make Money in Stocks" which incidently, is an excellent source of information. I pointed this out as a possibility on a 60-minute chart but will offer comments from O'Neil's book based on a daily chart. O'Neil says that a C&H formation "looks like" a cup with a handle when viewed from the side. The pattern generally lasts from 7 to as many as 65 weeks (perhaps periods when using short-term charts). He says most are usually three to six months duration. The usual percentage correction from the absolute peak to the low point of the price pattern varies from 12 or 15% to 33%. I'm by no means an expert on the C&H formation. In fact, I have great difficulty recognizing most of these so called C&H formations. The "handle" is formed on the right side of the cup and generally lasts one or two weeks and has a downward drift with decreasing volume preferred. Buy point occurs when price turns up from this handle area and exceeds the "pivot point" (high on left side of cup) by 1/8 point.

Hope this is helpful,
Bill
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