STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

P&F Bullish Catapult

A Bullish Catapult forms with an initial breakout, a short pullback and a second breakout. While the ideal Bullish Catapult starts with a Triple Top Breakout, Quadruple Top Breakouts or Multiple Top Breakouts are also possible. After the initial Triple Top Breakout, prices reverse and move back into the pattern. The initial breakout or resistance break is usually just 1-3 boxes. Prices move high enough to break resistance and there is not much upside after the initial breakout. A 3-box reversal then forms and a new O-Column declines back into the Triple Top pattern. This is just a pullback because the O-Column does not break below the low of the pattern or forge a Double Bottom Breakdown. Prices then turn back up with a new X-Column that exceeds the prior X-Column to complete the catapult (Double Top Breakout). The pullback into the pattern represents indecision among the bulls. The ability to overcome this indecision with another breakout shows renewed strength.



The chart above shows Williams Sonoma (WSM) with three Bullish Catapults. As with most P&F patterns, catapults can form as reversal or continuation patterns. It simply depends on the prior trend. The first Bullish Catapult reversed the downtrend with a Spread Triple Top Breakout in February 2009 and a Double Top Breakout in March. Notice that the breakout was 1-box and the pullback held above the low of the prior O-Column. The second Bullish Catapult occurred with a Multiple Top Breakout, a four-box pullback and a subsequent Double Top Breakout. The third is a classic Bullish Catapult within an uptrend, which makes it a continuation pattern.