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Cup and Handle.

The quick and dirty on cup and handle.

  1. Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. The more mature the trend, the less chance that the pattern marks a continuation or the less upside potential.
  2. Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. A "V" shaped bottom would be considered too sharp of a reversal to qualify. The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U". The perfect pattern would have equal highs on both sides of the cup, but this is not always the case.
  3. Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to 1/2. In extreme situations, the maximum retracement could be 2/3, which is conforms with Dow Theory.
  4. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward, other times just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement is, the more bullish the formation and significant the breakout. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup.
  5. Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks.
  6. Volume: There should be a substantial increase in volume on the breakout above the handle's resistance.
  7. Target: The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.
 
Bump and Run Reversal

Bump and Run Reversal (Reversal)


As the name implies, the Bump and Run Reversal (BARR) is a reversal pattern that forms after excessive speculation drives prices up too far, too fast. Developed by Thomas Bulkowski, the pattern was introduced in the June-97 issue of Technical Analysis of Stocks and Commodities and also included in his recently published book, the Encyclopedia of Chart Patterns.
The pattern was originally named the Bump and Run Formation, or BARF. Bulkowski decided that Wall Street was not ready for such an acronym and changed the name to Bump and Run Reversal. Bulkowski identified three main phases to the pattern: lead-in, bump and run. We will examine these phases and also look at volume and pattern validation.
barr-intl.png

  1. Lead-in Phase: The first part of the pattern is a lead-in phase that can last 1 month or longer and forms the basis from which to draw the trend line. During this phase, prices advance in an orderly manner, and there is no excess speculation. The trend line should be moderately steep. If it is too steep, then the ensuing bump is unlikely to be significant enough. If the trend line is not steep enough, then the subsequent trend line break will occur too late. Bulkowski advises that an angle of 30 to 45 degrees is preferable. The size of the angle will depend on the scaling (semi-log or arithmetic) and the size of the chart. It is probably easier to judge the soundness of the trend line with a visual assessment.
  2. Bump Phase: The bump forms with a sharp advance, and prices move further away from the lead-in trend line. Ideally, the angle of the trend line from the bump's advance should be about 50% greater than the angle of the trend line extending up from the lead-in phase. Roughly speaking, this would call for an angle between 45 and 60 degrees. If it is not possible to measure the angles, then a visual assessment will suffice.
  3. Bump Validity: It is important that the bump represent a speculative advance that cannot be sustained for a long time. Bulkowski developed what he calls an "arbitrary" measuring technique to validate the level of speculation in the bump. The distance from the highest high of the bump to the lead-in trend line should be at least twice the distance from the highest high in the lead-in phase to the lead-in trend line. These distances can be measured by drawing a vertical line from the highest highs to the lead-in trend line. An example is provided below.
  4. Bump Rollover: After speculation dies down, prices begin to peak and a top forms. Sometimes, a small double top or a series of descending peaks forms. Prices begin to decline towards the lead-in trend line, and the right side of the bump forms.
  5. Volume: As the stock advances during the lead-in phase, volume is usually average and sometimes low. When the speculative advance begins to form the left side of the bump, volume expands as the advance accelerates.
  6. Run Phase: The run phase begins when the pattern breaks support from the lead-in trend line. Prices will sometimes hesitate or bounce off the trend line before breaking through. Once the break occurs, the run phase takes over, and the decline continues.
  7. Support Turns Resistance: After the trend line is broken, there is sometimes a retracement that tests the newfound resistance level. Potential support-turned-resistance levels can also be identified from the reaction lows within the bump.
The Bump and Run Reversal pattern can be applied to daily, weekly or monthly charts. As stated above, the pattern is designed to identify speculative advances that are unsustainable for a long period. Because prices rise very fast to form the left side of the bump, the subsequent decline can be just as ferocious.
 
Show-me said:
Pennies man, come on. lol :D http://tinyurl.com/l698j
Click to expand...

I asked a friend of mine a while back if he had any investment books and he gave me a disk containing e-books/pdfs instead. I checked the disk again and it contained The Encyclopedia of Chart Patterns, 5 Winning Chart Patterns Every Daytrader Needs To Know, Investing Online for Dummies, etc. I wonder if he got it cheaper since it's not hardbook cover. :)
 
Here is the weekly s&p chart. Looks like it need a break to me.

http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=0&mn=6&dy=0&id=p06798009354

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_cand

Doji

Doji are important candlesticks that provide information on their own and as components of in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or bearish bias is based on preceding price action and future confirmation. The word "Doji" refers to both the singular and plural form.
candle2-doji1.gif

Ideally, but not necessarily, the open and close should be equal. While a doji with an equal open and close would be considered more robust, it is more important to capture the essence of the candlestick. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control and a turning point could be developing.
candle2-doji2.gif

Different securities have different criteria for determining the robustness of a doji. A $20 stock could form a doji with a 1/8 point difference between open and close, while a $200 stock might form one with a 1 1/4 point difference. Determining the robustness of the doji will depend on the price, recent volatility, and previous candlesticks. Relative to previous candlesticks, the doji should have a very small body that appears as a thin line. Steven Nison notes that a doji that forms among other candlesticks with small real bodies would not be considered important. However, a doji that forms among candlesticks with long real bodies would be deemed significant.

Doji and Trend

The relevance of a doji depends on the preceding trend or preceding candlesticks. After an advance, or long white candlestick, a doji signals that the buying pressure is starting to weaken. After a decline, or long black candlestick, a doji signals that selling pressure is starting to diminish. Doji indicate that the forces of supply and demand are becoming more evenly matched and a change in trend may be near. Doji alone are not enough to mark a reversal and further confirmation may be warranted.
candle2-longwhite_doji.gif

After an advance or long white candlestick, a doji signals that buying pressure may be diminishing and the uptrend could be nearing an end. Whereas a security can decline simply from a lack of buyers, continued buying pressure is required to sustain an uptrend. Therefore, a doji may be more significant after an uptrend or long white candlestick. Even after the doji forms, further downside is required for bearish confirmation. This may come as a gap down, long black candlestick, or decline below the long white candlestick's open. After a long white candlestick and doji, traders should be on the alert for a potential evening doji star.
 
I'm a "Point and figure" chart believer.

I didn't know much about P&F charts before about six months ago, but now find them incedibly useful.

http://www.stockcharts.com

then click on S&P500, and then look at the P&F chart.

It says it had a "high pole warning" on Oct 19th, indicitive of a lower price ahead.
 
Last edited:
Here's a 10 yr shot. This includes the MACD, showing that it is possible for the index to drop more. Also check out the index swings leading into the last recession. If anyone is wondering why I'm talking about the BKX index, is because this may effect the SPX, and right now there is a devergence between the two indexes.
View attachment 2419

Sorry for the small chart, but you can go to BigCharts.com, click on the interactive setting for BKX and play with it.

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=BKX&time=8
 
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Possible chart pattern today. Inverse Head and Shoulders neckline test. Previous neckline resistence becomes support. If support test holds, TA's see this.... then the money starts pouring in. Hopefully this will not be a DCB and the previous trend will continue.

View attachment 2446

" Resistance Turned Support: Once resistance is broken, it is common for this same resistance level to turn into support. Often, the price will return to the resistance break, and offer a second chance to buy. "

http://stockcharts.com/school/doku...._analysis:chart_patterns:head_and_shoulders_b


http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=DJIA
 
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