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Sunday
5/20/2001
Monday
plan:
5/18/2001
was very important day for me we were at the juncture either to go higher
or reverse down, I waited the whole day Friday to see some evidence of
direction, it came around the close and I explained yesterday why I am favoring
continuation of the trend up.
I know some
traders has taken short positions on the close last Friday.<?xml:namespace
prefix = o ns = "urn:schemas-microsoft-com:office:office"
/>
<SPAN
style="FONT-FAMILY: Arial; FONT-SIZE: 10pt"> <SPAN
style="FONT-FAMILY: Arial; FONT-SIZE: 10pt">In fact the way NASDAQ behaved
around the close tells me that Monday they will squeeze the shorts and force
them to cover the short and that will add more fuel to the trend to
continue up.(2 day NASDAQ stall at the resistance level and never reverse, I
think a lot accumulated short positions it was so obvious a resistance level and
turning point) maybe it is a trap for the trader who took short position and the
surprise on Monday when the start forcing them to cover.
<SPAN
style="FONT-FAMILY: Arial; FONT-SIZE: 10pt"> <SPAN
style="FONT-FAMILY: Arial; FONT-SIZE: 10pt">There is a cup with pattern
formation for NASDAQ on 60 min and daily bar. Below in green is taken from my
personal summery file for this particular pattern.
<SPAN
style="FONT-FAMILY: Arial; FONT-SIZE: 10pt"> <B
style="mso-bidi-font-weight: normal">Cup with
Handle
<B
style="mso-bidi-font-weight: normal"> <SPAN
style="COLOR: red">Synonyms:
none<B
style="mso-bidi-font-weight: normal">
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l2 level1 lfo2; tab-stops: list .25in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
How it looks: Like cup with
handle
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l2 level1 lfo2; tab-stops: list .25in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
What this formation mean:
Short term (up to 3 months) bullish consolidation
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l2 level1 lfo2; tab-stops: list .25in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
Formation
Characteristics:<SPAN
style="mso-tab-count: 1">
1.
Handle duration at least 1 week
2. Cup is
12%-33% in depth
3.Cup duration
is 7-65 weeks
4. Rise before
the cup is 30%
<FONT
color=#008000>
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l5 level1 lfo3; tab-stops: list .5in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
Formation fails in 10 % of the time (the price goes down after
formation occurred) if waited for breakout
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l5 level1 lfo3; tab-stops: list .5in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
Formation fails in 26 % of the time (the price continue to goes up
after formation occurred)if not waited for breakout
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l6 level1 lfo6; tab-stops: list .25in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
Focus on failure:<SPAN
style="mso-tab-count: 1"> 1. Failure of
handle formation creating double top formation
2. Failure of
handle price to rise more than 5% above the cup lip
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l7 level1 lfo5; tab-stops: list .25in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
<TABLE border=1 cellPadding=0 cellSpacing=0
style="BORDER-BOTTOM: medium none; BORDER-COLLAPSE: collapse; BORDER-LEFT: medium none; BORDER-RIGHT: medium none; BORDER-TOP: medium none; mso-table-layout-alt: fixed; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt">
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: windowtext 0.5pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in"
vAlign=top width=197>
Description
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: windowtext 0.5pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: windowtext 0.5pt solid; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
Average
rise of successful
formation
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
38%(40% with higher right lip
cup)
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
Most
likely rise
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
10-20%
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
Percentage
of pullback/throwback
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
74%
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
Average
time to pullback/throwback completion
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
12 days
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: windowtext 0.5pt solid; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
Days to
ultimate low/high
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
6.5 months (196days)
<TD
style="BORDER-BOTTOM: windowtext 0.5pt solid; BORDER-LEFT: medium none; BORDER-RIGHT: windowtext 0.5pt solid; BORDER-TOP: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 5.4pt; PADDING-RIGHT: 5.4pt; PADDING-TOP: 0in; WIDTH: 2.05in; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt"
vAlign=top width=197>
½ of formation reach the ultimate
high quickly in less than 3 months
<P class=MsoNormal
style="MARGIN-LEFT: 0.25in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo4; tab-stops: list .5in"><FONT
color=#008000>·<SPAN
style="FONT: 7pt 'Times New Roman'">
How to trade
it:
Risk: Reward
ratio 10% of formation failure: 20% of most likely gain
<LI class=MsoNormal
style="mso-list: l4 level1 lfo8; tab-stops: list .5in"><FONT
color=#008000>Measure rule: subtract the lowest low of the cup from the high
of the cup lip than added to the high of the right cup lip. Only 49% rise this
far. Use ½ the cup height to get more realistic price target (met 73% of the
time)
<LI class=MsoNormal
style="mso-list: l4 level1 lfo8; tab-stops: list .5in">use
above criteria
<LI class=MsoNormal
style="mso-list: l4 level1 lfo8; tab-stops: list .5in">Buy
after the throwback
<LI class=MsoNormal
style="mso-list: l4 level1 lfo8; tab-stops: list .5in">Buy
the inner cup if you discovered a cup within a cup, buy on the breakout of the
inner cup
<LI class=MsoNormal
style="mso-list: l4 level1 lfo8; tab-stops: list .5in"><FONT
color=#008000>watch for 15% failure: many cups fail after rising 10%-15% of
the time
6. Place stop loss 1/8 below the handle to limit losses
Tomorrow if you see
break of the resistance “don’t” jump in on the long side, wait until throwback
occur (75% chance) then use your judgment to enter.
My personal plan: since I am already long and
this swing is risk free since I moved my stop higher I will keep riding the wave
up and I may start pyramiding.
Happy trading,
Haytham
<SPAN
style="COLOR: green; FONT-FAMILY: Arial; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">Disclaimer:
THIS MEANT AS A TRADING LIVE EXERCISE, IT IS NOT A RECOMMENDATION TO BUY OR
SELL, SO USE YOUR OWN JUDGMENT"
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Attachment:
Description: "5-20-2001 Cup with the handle.gif"
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