Wednesday, July 27, 2005

GIGM triple-cup base analysis

A reader asked me about GIGM, so here is a post-move analysis using my triple-cup technique.

All of the trades on the chart could be identified without the benefit of hindsight using price and volume movement as a guide. Similar gains would have been captured whether you chose to use the 10 or 20 day SMA for buy-point 3 and closing out the position. Buy point 3 was sooner when the 10-day SMA is used, but the selling point was also sooner. It doesn't matter which one you choose, so use volume during the pullback as a guide.

Another thing I like about this chart is that it shows a failed triple-cup base a few months prior. When the triple-cup base fails, your loss is small because you've only committed to 1/3 of your full position. I never use more than 1/20 of my buying power on any one buy point, so even if the position gets blow away at any point while I'm in it, my equity isn't damaged much.


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