Southern ITS International, Inc. (SITS)

[righty]

CLAY, Seems we have some charting education to discuss. I just finished watching the trading without emotion segment on ASII.

Recalling a grammatical contention which was so inappropriately bandied about as being important in days gone by, I find myself at quite sharp odds with several mattters discussed in the ASII charting video, you were so kind as to prepare for this board.

First of all, in your interpretation of the ASII chart, several fundamental theories of the "cup and handle" formation were not correct.

I believe it is very important that the watchers of that video be informed as to these inconsistent distortions of the cup and handle formation developed by "William O'Neil" and published intially in his book in 1988 titled "How to Make Money in Stocks" very good book BTW.

This is very important as I often see amateur chartist's (and this is not you necessarily) using this formation to excite stock owners, and in particular when the chartist has a "position in the stock." (this much i do believe applies)

Now, in the interests of properly informing the ASII stockholders i will come right out and state in fact that the chart pattern here with ASII, is not, and could not in the slightest be construed as a cup and handle formation.

More so it fails on almost all the qualifying points. Before I lay out the theories of a proper or even close to proper C&H formation, I will caution people to strike this notion as even a slightest of possibility, ADAMANTLY.

Once having done so i encourage everyone to trade this stock with utmost caution, as the point Clay made about the tall wicked candle from today s very true and can likely be signalling a pullback, that much at the least is correct.

Now that said, this is a very common mistake among chartists, have even made it myself on occasion, but one must endeavor to be very carefull interpreting such signals prior to attaching them to stocks as they can mistakenly cause poor trading decisions to occur, worse yet for the chartist himself!

ok without further adieu, let's examine the chart.



problem #1
NO PRIOR MATCHING TREND
In order to be considered a continuing formation, a prior matching trend must have taken place.

The perfect rendition of a trend should about 3 months old and not too established in age.

If not a,"continuing formation"cannot be described and therefore calibration of the calculations by which the expected resulting uptrend would be performed, cannot be completed.

It is for this reason that this pattern cannot be deemed as such.

But, let's for argument sakes, assume this was such a formation.

On with the lesson.

Problem #2
According to "Oneil" the creator of the formation there nust be significant increase in "buying" volume on the breakout above the handles uppermost support/resistance range. As such no handle has even begun to form yet and even if it had , the following criteria is not in keeping with the entire cup formation in the first place.

Hence strike two

Now at this point, we virtually have no reasonable explanation for this formation being a C&h at all.

But this is microcap land and charts never lie, so where does this leave us?

Well possibly in that classic chartist no mans land where serious mistakes cause serious losses, or we could assume the stock has potential enough to continue to deleinate further possibilities of opportunity to classify this as a cup and handle.

Problem # 3
The bowl of the cup should be "U" shaped and ideally have a rounded bottom. "V" "W" or indented shaped bottoms do not qualify.

Sadly over the years this has been bastardized by many chartists. Ideally the sides would have equal highs on the sides. However this is not required, what is required is the sides should not be posessing too great of a variable of difference in height.

"Oneil" wrote that the perfect formation, would see the right side slighlty lower than the left. Again neither of these scenarios apply to the ASII chart.

Problem#4
Bowl volume
Prior to rising up the right side, the volume should weaken on the decline and stay lower than average, in the lower part of the bowl. Again, not the case with ASII

Problem #5
The price CAN not fall through the 200 day moving average WHEN forming the handle.

UHHH WERE FAR BELOW THE 200 DAY HERE, AND IN ORDER TO REACH IT THE RIGHT SIDE WOULD HAVE TO REACH FAR TOO HIGH THUS AGAIN DISQUALIFYING THE FORMATION ALL TOGETHER.

IN FACT EXPANDING THE CHART ONLY PROVES THIS THEORY AND THE PRIOR TREND THEORY IMPOSSIBLE AS THE 200 DAY IS FAR TOO DISTANT AND THE TREND OF THE RIGHT ENTIRE SIDE OF THE CHART IS FALLING, NOT THE OPPOSITE.

Problem #6
Volume is usually faint and dropping off when forming the right side of the bowl. This is because selling takes place when investors who bought into the left side uptrend to the high then sell into the uptrend of the right side of the cup which generally leads to the pattern of the handle.

Look at the chart this is not the case with ASII.

Now all that being said I fully understand that in charting it is not always necessary to capture the letter of the rule, but more important to illustrate the theory behind the rule and look for common similarities.

However it is not good enough to ignore the bulk of the rules in personal interpretation, and that in fact is where most chartists go wrong. Typically ones who have a position in a stock they are charting for others, in particular to the masses.

I hope this serves to educate you and the other ASII stockholders and helps everyone to make better informed decisions especially concerning such amplified bull signals such as the cup and handle.

Which as a historical pattern has major ramifications on the price of a stock if and where it actually applies for it is a theory predicated on the combination of MANY bullish idicators and not the indication provided by one two or three, in fact such a formation if and when it does form, can eliminate the need for relying on a vast number of traditional indicators.

Should any of you have any further questions about the ASII chart, get a hold of me, if not, thanks for listening.