Bulkowski's Masco (MAS) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): 2 broadening tops, double top, double bottom, ascending scallop, and descending broadening wedge.

Price has yet to breakout of the broadening top.

Answer 1 (buy?): Since price hasn't broken out yet, we don't have a clear buy signal. However, the partial rise suggests the breakout will be downward (it was upward). This technique only works 52% of the time, so that's random. When coupled with a performance rank of 28 out of 36 for downward breakouts (1 being best), I'd look elsewhere for a more promising trade.

Answer 2: If you decided to trade it, I'd short the stock. Use the measure rule to find a price target. Take the height of the pattern and project the height downward from the breakout price. Since we haven't broken out yet, use the lowest low as the breakout price. I suggest you be conservative and multiply the height by 42%, because that's how often the measure rule works, and then subtract the adjusted height from the breakout price.

Answer 3: I would put the stop above the top of the pattern but no closer than the volatility stop reading. Volatility is $1.18, so a stop no closer than 36.27 (the current high) + 1.18 = 37.45. That's about 40 cents above the highest high. If you shorted the stock, you would have been stopped out. However, the stock did make a substantial decline, just not when it should have.