Sam,
William O'Neil of IBD wrote a book on this. Basically he observed that stocks would exhibit this formation before taking off like rockets. Let's take Borl for example, looking at the SI daily chart, just after Dec 5 at under 11, it dropped down to 6+ around Jan 16 and curved back up to 10 on Feb 13, that's the cup as in a teacup. The handle is the smaller dip starting from Feb 20 to earlier this week. Granted that the handle looks kind of long, but fortunately, the same chart pattern also appears in the weekly chart. According to O'Neil, that's even stronger than the daily chart. Coming from Edwards and Magee school, at first it threw a curve at me. But after awhile, I kind of accepted that there's more than one way to skin a cat.
Coincidentally, the beginning of this week is also the 7th week from the last time it touched 10 on Feb 20. The master (Gann) is not to be denied about turning point on the 6 or 7 weeks/months/years. I tried to stretch his theory by saying that we will have two more weeks of dull action until the report, but I was wrong. On Tuesday, the volume swelled to 500K with very small change in price. My interpretation at the time was that buyers were taking everything that thrown in their way, but didn't want to drive up the prices. Wed morning started with heavy volume but this time, they ran out of sellers and the prices started to move, I thought that she was on her way up now, and she did. She closed the week without giving up even 1/16 of her 4 days gain. Very impressive, indeed.
The library may have O'Neil's book. It's been out for several years now and I thought that it's very good. |
