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With a cup and handle, I generally prefer no more than 25% retracement
in the handle but allow 38% before I consider the handle a failure. I
further measure the penetration of the handle against the pivot highs
and lows on the left side of the extreme low, specifically, when a new
pivot high is made on the right side of the extreme low, I look to the
left for the highest pivot high which has been exceeded and then expect
the immediately preceding pivot low to hold or consider it a failure.
Even more germane to your question are the last two bars which put in a
thrust reversal across the prior pivot high from which your horizontal
trendline is drawn - this is a clear failure signal. A short trade is
initiated one tick below the low of the up thrust bar with a stop at the
high. Initial target from the low of the upthrust bar is equal to the
distance to the pivot high. Confirmation of the cup and handle failure
is given when the low of the handle is exceeded on the downside.
As always, no pattern is ever guaranteed to produce profits so proper
money management is essential.
Earl
----- Original Message -----
From: "Dan Harels" <harelsdb@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Thursday, November 23, 2000 11:43 PM
Subject: [RT] Boeing crashes and burns
> Boeing, BA, just traced out a text book cup with handle pattern that
failed.
> I would appreciate analysis from Dr. G or others regarding how this
type
> of failed pattern develops and whether there are key charateristics to
watch
> for or price targets that can be anticipated.
>
> BA has been one of the small hand full of stocks in the DOW
industrials that
> has been strong over the last four or five months. Starting on
September
> 27, it began tracing out a cup with handle. The handle began forming
about
> November 1 and was progressing nicely on declining volume with a
retracement
> of 25 percent or less of the depth of the cup. On November 10, prices
broke
> and retraced more than 32 percent of the depth of the cup over the
next two
> days. Some sources say that cup with handle formations which have
handles
> that retrace more than 25 percent of the depth of the cup are prone to
> failure. BA broke out from its handle on November 21 with above
average
> volume, however, prices promptly fell back into the handle on November
22.
> This in my mind constitutes a failure of the pattern.
>
> Has the pattern in fact "failed"? Can we expect a big decline like
the one
> ORCL experienced following its failed cup with handle? What should we
watch
> for in terms of price and volume to confirm or refute our analysis?
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