CROX and YHOO Gap-Up on Huge Volume
"From The Trading Desk" May 4, 2007: All 4 major indexes were up in mixed volume again today. The S&P and Dow were both up .2% and the Nasdaq was up .4% in heavier volume. The Dow put in another all-time high. The markets keep grinding higher.
YHOO gapped-up and closed up almost 10% on Microsoft take-over rumors. CROX cleared a cup shaped base on a huge gap to close up almost 20%. The stock blew away earnings estimates and guidance and gapped over our 5% buy limit.
"Current Market Pulse":The market is in a confirmed rally and slowly moving higher. Although things are looking good today, caution is still advised. We are at lofty short-term levels and lesser-quality names are leading the rally. I am recommending caution. Sell your weaker acting stocks. Come off margin. Buy only the best CAN SLIM stocks like the ones we suggest. Only buy stocks that are emerging out of a solid and proper basing pattern on big volume. See our "Buy" list for candidates. Always cut your losses at 7%-8% below your purchase price No Matter What.
"Market-Leaders" Moving-Up on Volume: CROX, FSLR, PCLN, SPWR
"Market-Leaders" Moving-Down on Volume: RYAAY, BBND, AXR
If there was a "holy grail" in stock chart patterns, it would have to be the "Cup-With-A-Handle." According to William J. O'Neil, - founder of Investors Business Daily and the author of the seminal investing book "How To Make Money In Stocks," this pattern is the strongest one a growth stock can have.
The cup portion of the base starts forming after a previous run-up of at least 30%. During the prior move you want to see weeks of heavy volume where the price moves up. You also want to see the Relative Strength line improving. Look for a clear and definite prior uptrend.
The usual price correction from the peak to the bottom of the cup is usually around 12% - 15% and up to 33%. In a severe "bear market" a cup can sometimes be as deep as 50% or more. Growth stocks normally correct 1 1/2 to 2 1/2 times the general market. Stocks correcting more than this should be avoided.
In most cases the bottom part of the cup should be rounded like a "U" shape and not harsh like a "V." This allows the stock time for the buyers and sellers to find their equilibrium and it takes most of the "speculation" out of the stock.
At the bottom of the cup look for a shakeout or a sudden large price drop and then recovery to scare out the last of the weak holders. You also want to see areas of quiet trade at the bottom.
You also want to see "tight" price action in cup. On a weekly chart, tightness is small price movements from high to low for the week. It's also nice to see nearly un-changed closes for a few weeks as well. Wide price movements attract too much speculative attention to the stock and lessen the likelihood of a successful break-out.
As the stock climbs up and forms the "right" side of the cup you want to see days and weeks of heavy volume price moves. Gap ups on heavy volume are also desirable. Also, the number of heavy volume up-weeks should out-number the number of heavy volume down-weeks. Big volume up weeks, followed by light volume down weeks are good as well.
The Relative Strength line should lead or at least closely follow the stocks price into new high ground.
The cup portion of the base should last 7 weeks minimum to as long as 65 weeks. Most cups last three to six months.
HANDLES
The handle portion of the base is formed after the stock has built the right-side of the cup. A proper handle is at least one or two weeks long and "drifts" down in price along it's lows. Volume will dry up near the bottom of the handle.
If the handle "wedges" up, the handle did not serve to "shake-out" the last of the weaker holders and set-up the next price move. Wedging handles carry significantly more risk that the base will fail.
Handles usually form near the prior high of the cup (the high of the left side) and must form in the upper-half of the cup. The middle point of the handle should be above the middle point of the cup. The handle must also be above the 200-day moving average.
In a "bull market" the handle should drop no more than 10% - 15% from it's peak unless the stock forms a very large cup.
PIVOT POINT
The "buy point" or "pivot point" is usually ten cents above the highest point of the handle. You only want to buy here if the daily volume increases at least 50% above the average daily volume for the last 50 days.
Get aboard the “True Market Leading Stocks” that are “breaking-out” now!
We don't issue lots of stock-picks like the others. But the ones we do are Powerful Stocks that have the potential for gains of 50%-100%, 500% and more.
Sure, our stocks have huge earnings, showing tremendous recent strength, and are being accumulated by the top money managers on Wall St. But it's not enough just knowing their names. You have to know how to trade them. When to buy them and when to sell. Since the average high-growth stock eventually goes down over 70%, this knowledge is valuable. Sign-up today for your FREE TRIAL
We don't issue lots of stock-picks like the others. But the ones we do are Powerful Stocks that have the potential for gains of 50%-100%, 500% and more.
Sure, our stocks have huge earnings, showing tremendous recent strength, and are being accumulated by the top money managers on Wall St. But it's not enough just knowing their names. You have to know how to trade them. When to buy them and when to sell. Since the average high-growth stock eventually goes down over 70%, this knowledge is valuable. Sign-up today for your FREE TRIAL
Good trading is all about having solid and proven trading rules like the ones I use every day. Rules developed by the world's best traders like William J. O'Neil and Jesse Livermore. You can read more about them here:
THE TOP 12 RULES OF INVESTING You Need To Know
THE TOP 12 RULES OF INVESTING You Need To Know
Happy Trading,
Mark Gordon
GOLDENTICKER.COM
Past performance does not guarantee future results. Investing in stocks, bonds, ETFs, and mutual funds involves risk and loss of capital can occur. Consult with your financial advisor before investing in the stock market or making any investment decisions. This blog/website is solely for informational purposes and is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment product. This material is not to be construed as providing investment services in any jurisdiction where such offers or solicitation would be illegal.
Mark Gordon
GOLDENTICKER.COM
Past performance does not guarantee future results. Investing in stocks, bonds, ETFs, and mutual funds involves risk and loss of capital can occur. Consult with your financial advisor before investing in the stock market or making any investment decisions. This blog/website is solely for informational purposes and is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment product. This material is not to be construed as providing investment services in any jurisdiction where such offers or solicitation would be illegal.
