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I don't use P & F charts, but for those who
do, here is an idea for finding impending breakouts. Ron
D
Finding Strong Breakouts
We've gotten several questions recently about finding stocks that are
breaking out of trading ranges using our Scan Engine. Unfortunately, the
standard way to scan for such patterns is more complex than it seems. The
problem is that the concept of a "trading range" isn't easy to describe to a
computer. What's the minimum distance between the top and bottom of the range?
What's the maximum distance? How many times does the stock need to bounce within
the range? How close to the top must the stock get to constitute a bounce? etc.
etc. etc.
Fortunately, there is a shortcut - our Point & Figure pattern recognition
feature. Because P&F charts automatically filter out insignificant price
movements, pattern recognition is much simpler. A quick review of <A
href="">our P&F Alerts Page
reveals that the P&F Spread Triple Top pattern is very similar to the
trading range breakout pattern we are looking for. So any stock that has the
Spread Triple Top pattern now, but didn't have it the previous day, is worth a
close look.
Armed with that info, we head over to our Standard Scan Interface page and
plug in the following criteria:
<IMG height=389
src="gif00380.gif"
width=747>
Note the final criteria - "The chart does not have a Spread Triple Top
pattern for yesterday". Since P&F patterns can remain valid for days, weeks,
or even months into the future, this last criteria line ensures that only those
stocks that have just formed a Spread Triple Top pattern are returned.
When I ran that scan this weekend, I only got one stock on the results page -
Vical, Inc. (VICL). Here's the P&F chart:
<IMG height=427
src="png00144.png"
width=520>
The chart looks promising to my eye - not only is the stock breaking out, but
it is also breaking above its long-term downtrend line (red). To be sure, let's
look at a standard candlestick chart of VICL:
<IMG height=294
src="png00145.png"
width=700>
The Price-by-Volume bars on the left side of the chart show that VICL has
been moving sideways for sometime and help confirm that the recent move above $5
is very significant. While more research may be required before we pull the
trigger here, this chart is obviously worth a close look.
- Chip Anderson
<IMG height=1
src="gif00381.gif" width=50>
<IMG height=35
src="gif00381.gif"
width=670>
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