BigTrends

A couple of times this year I blogged about the cup/handle pattern. (Mar 11 and Jun 11). Take a look back at those entries.

I believe we are embarking on another similar pattern, but the handle or dip has not been made yet. We could see that happen soon, heck the market is up 10% in about three weeks. Buying into a low volume sell down that creates the handle is the ideal low risk entry we look for.

Although the markets as a whole are not in great shape and mostly reflect a range there are some very nice looking chart setups currently.  Back in March/April I posited on some charts noticed a slew of cup/handle patterns.

As a refresher, this is a chart pattern first identified by William O'Neill, great trader and publisher of IBD.  Basically the formation is a bottoming and rise (forming a cup) and then a pause at the breakout (forming the handle).  A series of higher lows and higher highs occur.  This is a timeless pattern for a bullish construct that plays out over and over.  Waiting for this great pattern to occur and then jumping on can be the springboard of huge profits.

CAUTION:  there are stocks IN the formation and stocks that are trying to get there.   In my work today I see some very good cup/handle setups:

DVN, CHK, CEO,  IBM, XOM, CRM, ICE.

One of the best patterns to play in a bull market is the cup/handle, coined appropriately by William O'Neil of IBD fame.  This chart pattern shows a big surge after a pause (cup) in the stock price then a rest on lower volume (handle), which tends to look like a coffee cup (hence the name).  This is a timeless pattern that has worked in every bull market.  Last week, I was scouring chart after chart and all I could find were these patterns.  I don't recall having seen so many setups since 2004, which turned out to be a pretty good year for stocks.  An example of a current cup/handle is below.