Wednesday, December 14, 2005

Cup & handle on TWX weekly chart

TWX weekly 12-14-05

I like to put on a probe position near the low of the handle when a stock makes a well defined cup and handle chart pattern like what we're seeing here on TWX's weekly chart. I've done that with TWX today. I'll add to my position if it breaks out above its upper-channel line, the one I've drawn across the top of the recent price peaks. If it breaks out, and as long as everything still looks good, there will be one last chance to add to my initial position when TWX pulls back to a 10 or 20 day simple moving average. I usually don't use all three of these buy points, but they work well as checkpoints for monitoring the stock's progress.

To review, the three buy points I use for putting on an initial position are:

1) Buying near the low in a handle or consolidation. I use intra-day charts to get the best price I can. I tend to buy slightly after the actual low.

2) Buying an upper-channel line break that appears on daily and weekly charts. I usually make these buys towards close of the day or week, but if it gaps across the line then I'll buy at the open.

3) Buying the first pullback to the 10 or 20 day simple moving average. This is my least favorite of the three, but it is important for getting aboard powerful market moves when I'm late to the party.

"So how 'bout those Pet Shop Boys?" -- Dave M.


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