Clicking on my books below takes you to Amazon.com. At no cost to you, they pay for the referral (if you buy anything) and that helps support this site.

Written and copyright © 2008 by Thomas N. Bulkowski. All rights reserved.

Monday, 7/7/2008. Stocks: How Low Will They Go?

Just a quick note for Monday. I released the RSS feed on Thursday. You can subscribe to it by clicking on the RSS feed symbol just above my books on the left of this page or this one...

I show a monthly chart of the S&P 500 index. It looks complicated, so let’s take it one step at a time. The first thing I noticed was the forming Eve & Eve double top shown here as peaks A and B. The pattern becomes valid once the index closes below valley C.

I highlight the crash of 1987. Can you guess when that occurred? It sounds like a trick question, but he answer is, of course, 1987.

Along the way up the index are support regions circled in green at H, G, and F, where the index may reverse. Notice that congestion region F forms near bottoms D and E.

I extended the current price bottom using a magenta line and that is the horizontal line. Immediately below that is the first support region, line I, colored in dark green. This corresponds to a 38% retrace of the move up from C to B. Below that is support line J which bottoms a congestion region, circled and a valley to the left of E where the line starts. Another support line formed by the triple bottom at C, when the last bear market ended, appears as link K.

I show a thin red trendline beginning at H, touching the bottoms at C and continuing upward. This could act as support. However, if you draw a trendline from the low in 1987 (shown in yellow, so it does not clutter the screen but it IS hard to see), it will trend up, cutting valleys E and C midway and touching peak B. In other words, the average has been following it for quite some time, dropping below it at C and after B (currently).

What does all of this mean? The first potential turning point is line I. That may happen when the average touches the red trendline, probably quite soon. That would be a 38% retrace and a decline to 1200. We closed Friday at 1,262. Below that, line J is at 1,050 with a 50% retrace being at 1,100. A 62% retrace would be at 1,000, a nice round number. I do not show that on the chart but it is a possibility. The low at line K is 770.

If the double top confirms, then the measure rule for double tops in stocks says that the average will decline to...are you ready for this? The height of the double top is: 1,576 - 768 or 808. Subtracting that from the confirmation low of 768 gives a target of minus 40. Unlike some political campaigns, the average will not go negative. By the way, the chart uses a log scale, so vertical distances are distorted, for lack of a better word.

What is my guess? I vote for line I, but that may be wishful thinking. Both C and the current drop have moved below the 1987 trendline by similar amounts, so maybe the drop is over?

Thursday, 7/3/2008. Patterns for the Weekend.

Since Friday is a U.S. holiday, I am issuing the patterns for the weekend a day early.

Please note that for archived blog postings, this list reflects the most recent securities, and not those posted originally.

Weekly screen for chart patterns ending between 06/24/2008 and 07/02/2008.

Here are the chart patterns that appeared within the last week, many are unconfirmed (still in development and may not be valid). If no securities appear, then I have not identified any new patterns.

Industry: Metals and Mining (Div.)

Industry RS rank: 24 out of 46

Stock RS rank: 28 out of 560

Latest close as of 07/02/2008: $62.21

1 Month average volatility: $3.74. Volatility based stop (assuming a downward breakout): $82.43 or 32.5% above the close.

Change year to date: 38.46%

Volume: 17,908,300 shares

3 month average volume: 2,813,448 shares

 

Chart pattern: Head-and-shoulders top reversal pattern from 06/09/2008 to 06/30/2008

Performance rank: 1 out of 21.

Breakout is downward 100% of the time.

Average decline: 22%.

Break-even failure rate: 4%.

Pullbacks occur 50% of the time.

Price meets the measure rule target 55% of the time.

Industry: Human Resources

Industry RS rank: 12 out of 46

Stock RS rank: 209 out of 560

Latest close as of 07/02/2008: $42.10

1 Month average volatility: $0.82. Volatility based stop (assuming a downward breakout): $44.77 or 6.4% above the close.

Change year to date: -5.46%

Volume: 4,467,800 shares

3 month average volume: 2,478,509 shares

 

Chart pattern: Triangle, descending reversal pattern from 04/14/2008 to 06/26/2008

Performance rank: 10 out of 21.

Breakout is downward 64% of the time.

Average decline: 16%.

Break-even failure rate: 16%.

Pullbacks occur 54% of the time.

Price meets the measure rule target 54% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 43 out of 46

Stock RS rank: 64 out of 560

Latest close as of 07/02/2008: $12.01

1 Month average volatility: $0.26. Volatility based stop (assuming a downward breakout): $12.64 or 5.2% above the close.

Change year to date: 28.59%

Volume: 52,100 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Rectangle bottom continuation pattern from 05/20/2008 to 07/02/2008

Performance rank: 12 out of 21.

Breakout is downward 55% of the time.

Average decline: 14%.

Break-even failure rate: 16%.

Pullbacks occur 69% of the time.

Price meets the measure rule target 50% of the time.

Industry: Telecom. Equipment

Industry RS rank: 35 out of 46

Stock RS rank: 550 out of 560

Latest close as of 07/02/2008: $15.31

1 Month average volatility: $0.91. Volatility based stop (assuming an upward breakout): $13.48 or 12.0% below the close.

Change year to date: -60.73%

Volume: 937,800 shares

3 month average volume: 446,989 shares

 

Chart pattern: Falling wedge from 04/22/2008 to 06/26/2008

WARNING: A dead-cat bounce occurred on 02/22/2008. There is a 38% chance that a 15% or higher decline will occur (or has occurred since then) by 08/22/2008.

Performance rank: 20 out of 23.

Breakout is upward 68% of the time.

Average rise: 32%.

Break-even failure rate: 11%.

Throwbacks occur 56% of the time.

Price meets the measure rule target 70% of the time.

Industry: Chemical (Specialty)

Industry RS rank: 8 out of 46

Stock RS rank: 448 out of 560

Latest close as of 07/02/2008: $5.70

1 Month average volatility: $0.38. Volatility based stop (assuming an upward breakout): $4.93 or 13.4% below the close.

Change year to date: -26.92%

Volume: 2,854,200 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Dead-cat bounce from 06/25/2008 to 06/26/2008

Industry: Retail (Special Lines)

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 23 out of 46

Stock RS rank: 507 out of 560

Latest close as of 07/02/2008: $6.78

1 Month average volatility: $0.47. Volatility based stop (assuming an upward breakout): $5.73 or 15.5% below the close.

Change year to date: -40.79%

Volume: 917,900 shares

3 month average volume: 619,845 shares

 

Chart pattern: Dead-cat bounce from 06/26/2008 to 06/27/2008

Industry: Telecom. Equipment

Industry RS rank: 35 out of 46

Stock RS rank: 271 out of 560

Latest close as of 07/02/2008: $49.22

1 Month average volatility: $1.39. Volatility based stop (assuming an upward breakout): $46.23 or 6.1% below the close.

Change year to date: -8.87%

Volume: 445,300 shares

3 month average volume: 360,760 shares

 

Chart pattern: Triangle, ascending reversal pattern from 06/05/2008 to 07/02/2008

Performance rank: 17 out of 23.

Breakout is upward 70% of the time.

Average rise: 35%.

Break-even failure rate: 13%.

Throwbacks occur 57% of the time.

Price meets the measure rule target 75% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 43 out of 46

Stock RS rank: 426 out of 560

Latest close as of 07/02/2008: $24.54

1 Month average volatility: $0.88. Volatility based stop (assuming a downward breakout): $27.25 or 11.0% above the close.

Change year to date: -24.24%

Volume: 686,900 shares

3 month average volume: 821,452 shares

 

Chart pattern: Broadening top, right-angled and ascending reversal pattern from 05/12/2008 to 06/26/2008

Performance rank: 19 out of 21.

Breakout is downward 66% of the time.

Average decline: 15%.

Break-even failure rate: 20%.

Pullbacks occur 65% of the time.

Price meets the measure rule target 32% of the time.

Industry: Petroleum (Integrated)

Industry RS rank: 36 out of 46

Stock RS rank: 99 out of 560

Latest close as of 07/02/2008: $95.13

1 Month average volatility: $3.34. Volatility based stop (assuming an upward breakout): $88.41 or 7.1% below the close.

Change year to date: 12.13%

Volume: 2,353,000 shares

3 month average volume: 1,539,792 shares

 

Chart pattern: Triangle, symmetrical continuation pattern from 06/05/2008 to 06/26/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 60 out of 560

Latest close as of 07/02/2008: $63.84

1 Month average volatility: $2.94. Volatility based stop (assuming an upward breakout): $57.96 or 9.2% below the close.

Change year to date: 21.14%

Volume: 1,894,500 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Triangle, symmetrical continuation pattern from 05/15/2008 to 06/26/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Industry: Telecom. Equipment

Industry RS rank: 35 out of 46

Stock RS rank: 207 out of 560

Latest close as of 07/02/2008: $4.05

1 Month average volatility: $0.20. Volatility based stop (assuming a downward breakout): $4.62 or 14.0% above the close.

Change year to date: 0.50%

Volume: 1,787,800 shares

3 month average volume: 3,668,457 shares

 

Chart pattern: Diamond top reversal pattern from 05/15/2008 to 07/01/2008

Performance rank: 7 out of 21.

Breakout is downward 69% of the time.

Average decline: 21%.

Break-even failure rate: 6%.

Pullbacks occur 57% of the time.

Price meets the measure rule target 76% of the time.

Industry: Semiconductor

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 46 out of 46

Stock RS rank: 178 out of 560

Latest close as of 07/02/2008: $13.90

1 Month average volatility: $0.43. Volatility based stop (assuming a downward breakout): $15.45 or 11.2% above the close.

Change year to date: -2.11%

Volume: 3,454,800 shares

3 month average volume: 3,246,589 shares

 

Chart pattern: Triangle, descending reversal pattern from 04/15/2008 to 06/25/2008

Performance rank: 10 out of 21.

Breakout is downward 64% of the time.

Average decline: 16%.

Break-even failure rate: 16%.

Pullbacks occur 54% of the time.

Price meets the measure rule target 54% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 43 out of 46

Stock RS rank: 516 out of 560

Latest close as of 07/02/2008: $6.14

1 Month average volatility: $0.32. Volatility based stop (assuming a downward breakout): $7.00 or 14.0% above the close.

Change year to date: -45.13%

Volume: 252,400 shares

3 month average volume: 345,751 shares

 

Chart pattern: Rectangle bottom continuation pattern from 05/28/2008 to 07/02/2008

Performance rank: 12 out of 21.

Breakout is downward 55% of the time.

Average decline: 14%.

Break-even failure rate: 16%.

Pullbacks occur 69% of the time.

Price meets the measure rule target 50% of the time.

Industry: Drug

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 28 out of 46

Stock RS rank: 406 out of 560

Latest close as of 07/02/2008: $20.54

1 Month average volatility: $0.63. Volatility based stop (assuming a downward breakout): $22.09 or 7.5% above the close.

Change year to date: -21.75%

Volume: 1,916,800 shares

3 month average volume: 2,516,074 shares

 

Chart pattern: Triangle, descending reversal pattern from 05/13/2008 to 06/30/2008

Performance rank: 10 out of 21.

Breakout is downward 64% of the time.

Average decline: 16%.

Break-even failure rate: 16%.

Pullbacks occur 54% of the time.

Price meets the measure rule target 54% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 10 out of 560

Latest close as of 07/02/2008: $47.61

1 Month average volatility: $2.15. Volatility based stop (assuming an upward breakout): $43.27 or 9.1% below the close.

Change year to date: 70.89%

Volume: 7,867,700 shares

3 month average volume: 2,327,195 shares

 

Chart pattern: Triangle, symmetrical continuation pattern from 05/21/2008 to 06/26/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Industry: Oilfield Svcs/Equipment

Industry RS rank: 4 out of 46

Latest close as of 07/02/2008: $148.02

1 Month average volatility: $3.80. Volatility based stop (assuming an upward breakout): $140.30 or 5.2% below the close.

Change year to date: 8.07%

Volume: 1,259,900 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Triangle, symmetrical continuation pattern from 06/04/2008 to 07/01/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Wednesday, 7/2/2008. Industry relative strength pick.

Tom Brayman noticed that the RSI model portfolio had trailing stops turned on. This probably occurred when I was experimenting with the industry relative strength portfolio. Anyway, the corrected portfolio now appears in the associated model portfolio page. Thanks Tom...

I walked down to the grocery store for some celery and onions and on the way, passed two 18 wheel delivery trucks at Lowes with drivers inside, engines idling. I guess the price of diesel fuel has not changed their habits. If they don’t learn to turn off the engines and open the windows instead of sitting there in the comfort of air conditioning, they won’t have jobs. What company can afford to pay high prices for fuel when drivers are not driving? Maybe they will get the message when the pink slips come. Contrast that with UPS drivers. When they bound out of their trucks, the engines are off. That outfit has my admiration, especially when they clued me in to right turns. If you have two routes to your destination, with one having more right turns than left, take the route with the rights turns. Why? Because you will not be stuck waiting to make a left turn while traffic clears. You’ll save time and time means gas. Of course if you eat beans, you’ll have all the gas you need. I tested this...

I show Southwest Energy on the daily scale not as a buy pick but with additional research, you can consider it one. It shows a symmetrical triangle with an upward breakout in an industry ranked 2 out of 49 for performance, where 1 is best. The stock ranks 9 out of 561 for price performance over the last 6 months. Both are excellent numbers. The stock is not cheap, but it is not google expensive either.

According to my scoring system for symmetrical triangles, it ranks 0. That means it is not a screaming buy nor a sell: neutral, in other words. The pattern height is short, and that is usually not good for performance but since it is near the yearly high, overhead resistance is absent. Breakout volume is also below average, so that is bad, too. Be careful with this one. A median rise would place the target at 62.35.

If you want to go trolling for other stocks in the diversified natural gas industry, I list them below.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 271 out of 561

Latest close as of 07/01/2008: $34.22

1 Month average volatility: $0.58. Volatility based stop (assuming an upward breakout): $33.01 or 3.5% below the close.

Change year to date: -9.09%

Volume: 879,700 shares

3 month average volume: 663,034 shares

 

Chart pattern: Triangle, ascending reversal pattern from 08/28/2007 to 10/03/2007

Performance rank: 17 out of 23.

Breakout is upward 70% of the time.

Average rise: 35%.

Break-even failure rate: 13%.

Throwbacks occur 57% of the time.

Price meets the measure rule target 75% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 209 out of 561

Latest close as of 07/01/2008: $27.75

1 Month average volatility: $0.46. Volatility based stop (assuming a downward breakout): $28.72 or 3.5% above the close.

Change year to date: -1.03%

Volume: 682,400 shares

3 month average volume: 515,266 shares

 

Chart pattern: Pipe top reversal pattern from 01/28/2008 to 02/04/2008

Performance rank: 4 out of 21.

Breakout is downward 100% of the time.

Average decline: 20%.

Break-even failure rate: 11%.

Pullbacks occur 41% of the time.

Price meets the measure rule target 70% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 10 out of 561

Latest close as of 07/01/2008: $68.58

1 Month average volatility: $3.20. Volatility based stop (assuming an upward breakout): $59.67 or 13.0% below the close.

Change year to date: 69.88%

Volume: 1,803,500 shares

3 month average volume: 916,454 shares

 

Chart pattern: Pipe bottom reversal pattern from 04/21/2008 to 04/28/2008

Performance rank: 2 out of 23.

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price meets the measure rule target 83% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 39 out of 561

Latest close as of 07/01/2008: $123.00

1 Month average volatility: $4.06. Volatility based stop (assuming a downward breakout): $131.35 or 6.8% above the close.

Change year to date: 38.34%

Volume: 6,189,000 shares

3 month average volume: 3,686,202 shares

 

Chart pattern: Rising wedge reversal pattern from 11/14/2007 to 12/31/2007

Performance rank: 20 out of 21.

Breakout is downward 69% of the time.

Average decline: 14%.

Break-even failure rate: 24%.

Pullbacks occur 63% of the time.

Price meets the measure rule target 46% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 70 out of 561

Latest close as of 07/01/2008: $78.06

1 Month average volatility: $1.95. Volatility based stop (assuming an upward breakout): $73.27 or 6.1% below the close.

Change year to date: 21.53%

Volume: 666,900 shares

3 month average volume: 720,922 shares

 

Chart pattern: Triangle, symmetrical continuation pattern from 01/28/2008 to 02/20/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 49 out of 561

Latest close as of 07/01/2008: $69.45

1 Month average volatility: $2.02. Volatility based stop (assuming an upward breakout): $63.15 or 9.1% below the close.

Change year to date: 30.35%

Volume: 1,211,800 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Head-and-shoulders bottom reversal pattern from 05/29/2007 to 07/25/2007

Performance rank: 7 out of 23.

Breakout is upward 100% of the time.

Average rise: 38%.

Break-even failure rate: 3%.

Throwbacks occur 45% of the time.

Price meets the measure rule target 74% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 54 out of 561

Latest close as of 07/01/2008: $59.63

1 Month average volatility: $1.16. Volatility based stop (assuming a downward breakout): $62.21 or 4.3% above the close.

Change year to date: 27.74%

Volume: 586,500 shares

3 month average volume: 599,800 shares

 

Chart pattern: Pipe top reversal pattern from 10/29/2007 to 11/05/2007

Performance rank: 4 out of 21.

Breakout is downward 100% of the time.

Average decline: 20%.

Break-even failure rate: 11%.

Pullbacks occur 41% of the time.

Price meets the measure rule target 70% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 65 out of 561

Latest close as of 07/01/2008: $66.70

1 Month average volatility: $2.81. Volatility based stop (assuming an upward breakout): $58.61 or 12.1% below the close.

Change year to date: 26.57%

Volume: 1,802,100 shares

This security may be thinly traded (less than 100,000 shares)!

 

Chart pattern: Triangle, symmetrical continuation pattern from 05/15/2008 to 06/26/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 120 out of 561

Latest close as of 07/01/2008: $49.29

1 Month average volatility: $0.93. Volatility based stop (assuming a downward breakout): $51.28 or 4.0% above the close.

Change year to date: 10.10%

Volume: 717,200 shares

3 month average volume: 717,494 shares

 

Chart pattern: Triangle, descending reversal pattern from 05/20/2008 to 06/12/2008

Performance rank: 10 out of 21.

Breakout is downward 64% of the time.

Average decline: 16%.

Break-even failure rate: 16%.

Pullbacks occur 54% of the time.

Price meets the measure rule target 54% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 46 out of 561

Latest close as of 07/01/2008: $73.38

1 Month average volatility: $1.95. Volatility based stop (assuming a downward breakout): $77.66 or 5.8% above the close.

Change year to date: 35.64%

Volume: 2,845,700 shares

3 month average volume: 1,006,126 shares

 

Chart pattern: Double Top, Eve and Adam reversal pattern from 11/01/2007 to 01/14/2008

Performance rank: 13 out of 21.

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price meets the measure rule target 72% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 269 out of 561

Latest close as of 07/01/2008: $27.01

1 Month average volatility: $0.56. Volatility based stop (assuming an upward breakout): $25.53 or 5.5% below the close.

Change year to date: -8.00%

Volume: 747,800 shares

3 month average volume: 624,069 shares

 

Chart pattern: Head-and-shoulders bottom reversal pattern from 03/06/2008 to 04/14/2008

Performance rank: 7 out of 23.

Breakout is upward 100% of the time.

Average rise: 38%.

Break-even failure rate: 3%.

Throwbacks occur 45% of the time.

Price meets the measure rule target 74% of the time.

Industry: Natural Gas (Diversified)

Industry RS rank: 2 out of 46

Stock RS rank: 9 out of 561

Latest close as of 07/01/2008: $48.53

1 Month average volatility: $1.99. Volatility based stop (assuming an upward breakout): $43.20 or 11.0% below the close.

Change year to date: 74.19%

Volume: 5,992,600 shares

3 month average volume: 2,327,195 shares

 

Chart pattern: Triangle, symmetrical continuation pattern from 05/21/2008 to 06/26/2008

Performance rank: 16 out of 23.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price meets the measure rule target 66% of the time.

Tuesday, 7/1/2008. A new month and another missed trade.

Each new month brings opportunity, but some things never change. I vacuum the house, whether it needs it or not (it always does), do my wash, and that includes washing the dog. If I say "bath" to her and then reach down to pick her up, she will bite me. Instead, I entice her into the bath with a dog treat and give her another when we’re done splashing and covering everything in sight with wet dog hair. And yes, that is a picture of her when we were fooling around outside.

A new month is also an opportunity for reminders. If you see an ad that looks interesting, then click on it. But before you sign up for any service, be sure to check the disclaimers and privacy notices. Some websites are paid to tout stocks and you will want to avoid those sites/stocks. For the record, I do not discuss securities recommended/touted by others nor accept any type of compensation to discuss, highlight, or mention a security. If I own a security that I discuss, I will tell you.

If you buy anything (clothing, books, whatever) from Amazon.com then please do so through this site. To do that, just click (or maybe 2 clicks) on any book picture and it will take you there. After a purchase, I receive a small referral fee and that helps support this site. Using this site as a feeder to Amazon does not increase your fee in any way.

###

I was wondering how to make money in this market and decided on buying an oil stock. On June 23, I added it to my watch list, which you can find either from the home page or by clicking on the Model Portfolios button at the top of this page. You will find it listed in both places as Bulkowski’s Watch List.

Anyway, after the market closed, I placed a buy stop on ATW at 109.31, a penny above the day’s high. I fully expected the order to be hit and I wanted it to be. Before I go further, let’s look at my notebook entry for the trade.

Today's date: 06/23/2008

Order details: Buy stop @ 109.31. A penny above today's high.

Date bought:

Stop: 97.45 -10.5%. Stop used: 99.21

Upside target: Score: 3. Target: 140.43.

SAR: None. It's at yearly high, once it clears the triangle top

Weinstein stage: 2

Next earnings: August 8

Weekly scale (industry, too): Industry is ranked 1. This stock is ranked 116/550.

Indicators: CCI: buy today. BB: narrowing.

Buy reason: breakout from symmetrical triangle in a top ranked industry. This has lots of insider selling since February 08, buying in Dec 07. Ford expects above avg performance in next 3 months. P/E is near the 5 year low (17.7 is the low. It's at 20.3 and high end is at 72.8).

I entered the order after I posted it to the blog and the order was for the next day, not as a market order but as a buy stop. That is a buy order that executes as a market order once price rises to the stop price. A volatility stop was set for 97.45 or 10.5% below the current close but I used a closer one, at 99.21. That would put it below a support zone, as I recall. I show the stop loss price as the green line.

I used the scoring system discussed in my Trading Classic Chart Patterns book. I won’t go through how I score it, but you can do the same here (or click the "Scoring Patterns" button at the top of this page and then symmetrical triangles. The score was +3, meaning the probabilities were on my side for a winning trade. Based on the median rise of similar triangles, it said the target was 140.43.

The Weinstein stage is 2, meaning price is taking off and it is based on the book, Stan Weinstein's Secrets For Profiting in Bull and Bear Markets.

The earnings announcement is more than 3 weeks away, so I don’t have to worry about the announcement dropping the stock in half, or worse. I chose this stock because of the high (1) industry rank (out of 48 at the time, where 1 is best), but the stock performance over the last 6 months ranked 116 out of 550 for performance, where 1 is best. Thus, the stock was an ok choice but not a barn burner. Perhaps that was to be expected since the stock was forming a symmetrical triangle. Anyway, the commodity channel index (CCI) said buy and Bollinger bands were narrowing, suggesting a large price move was coming (but no guarantee).

I looked at broker reports for the stock and was pleased to find that the P/E (price to earnings) ratio was near the bottom of its 5 year range. From a fundamental perspective, that meant it was a screaming buy. Ford Equity Research also said that prior price trends indicated above average price performing in the coming 3 months. I believe their performance rankings are useful and accurate but I have not tested them yet.

So what happened? The next day, June 24, the market opened lower and proceeded to drop. When I checked on it, I was surprised to find that the high for the stock was posted as 110.51 but the stock chart did not reflect that. In fact, the stock never climbed to the buy stop and my order never executed, despite showing a high that day above the buy stop of 109.31. Since the stock was dropping, I did not call my broker and complain. I’m not that dumb. Instead, I canceled the buy order and felt good that I missed another loser. (I have seen this in the past in other stocks. When I asked my broker about such occurrences, he said that the trade is like a market marker correcting a mistake but they are required to post the trade by the exchanges. Thus, even though it set a new high for the day, the trade did not actually take place during market hours and the buy stop was not triggered. That is the best explanation I can give. It certainly is weird).

As the chart shows, the stock took off in the coming days, climbing something like 5% the next day and continuing at a similar high rate. The high today was 125.89, or 15% above my buy stop. The stocks I own are going down and the ones I don’t buy take off. Sigh.