Читать книгу Encyclopedia of Chart Patterns - Thomas N. Bulkowski - Страница 113

Sharon likes to think of herself as the brains in the family. While her husband is suffering in foul weather as a carpenter, she is hammering away at her keyboard, a slave to her computer masters. She uses profit from her swing trading to build their emergency fund. “Last month I found a pair of Manolo Blahniks.” She sighed. “It was a shoe emergency.” She glanced at me.

My eyebrow ticked up. “A shoe emergency?”

She nodded. “Let me show you…”

We're old friends, so I grabbed her arm. “Stop right there!” I knew that once she started showing me her collection, I'd be there all day.

Figure 8.5 A broadening bottom with five alternating touches. Expect an immediate downward breakout because a partial rise appears.

Sharon is not afraid to short a stock, given good profit potential and an especially weak fundamental or technical situation. It is a stressful life, but making money often is.

“When I spotted the broadening bottom,” she said (shown in Figure 8.5), “I became interested.”

The stock reached a high of 37.38 in early November 1991 and had been heading down since.

“With the stock trading at 14, I wondered how much downside remained, so I drew the two trendline boundaries and counted the number of alternating touches.” Three are labeled as numbers in the figure and points A and B are the remaining touches.

“Because the stock was near A, heading down, I guessed that it would break out downward on the next cross. I did research to try to prove it, and then I shorted the stock at 13.88. It was a gamble, but one I was comfortable with. I placed a stop at 14.25, just above A.”

She snapped her fingers, “Bingo! Two days later the stock plummeted to the other side of the pattern,” touching the bottom trendline at point B. “Usually my trades aren't that easy. I lowered my stop to 15 cents above C [the nearest minor high], and waited.”

The stock bounced off the lower trendline instead of busting through as she hoped. She decided to be patient and see what the stock did next. With her stop‐loss order in place at the breakeven price, she felt protected and comfortable letting the trade ride.

A partial rise formed before meeting resistance and heading back down. “I believed that when the stock reached the bottom trendline, it would break out downward this time, so I doubled my position.”

She sighed. “I was wrong.”

“It takes a big man to admit that,” I said and winked at her. The stock continued down one more day before easing higher.

“I adjusted my stop‐loss order to include the additional shares, but kept it at the same price [13.75, C]. Then I waited.”

The stock reached a minor high of 13.13 before heading down again. This time the decline was strong enough to punch through support at the lower trendline.

“When the stock dropped below point B toward the end of May, I lowered my stop to 15 cents above B,” or 12.15.

She looked at the measure rule for the price target. She calculated a target of 9.88 and wondered if the stock would really reach that price. To be safe, she decided to cash out if the stock reached 10.15, or 15 cents above the common support price of 10 (a whole number typically shows support and resistance).

“The stock hit 10.38 on high volume. I thought it might be a one‐day reversal.” With those chart patterns, it's difficult to be sure if price would reverse or not. “I decided to hold on and kept my original target in place.”

She pointed at the screen, “Two days later, the stock zipped higher and tagged my stop. I made only 9% and moved the profit into our emergency fund.”

She looked at her watch and gasped. “There's a shoe store having a liquidation sale in twenty minutes. They sell Jimmy Choos. I have to go.” She raced out of the room.