The following is where I believe we are at right now, in the consolidation period, we have been there for almost 5 weeks now, I'd say another week or maybe a few, and we break .075 on the next leg and hopefully this gives us the MOMO to get to the double digits.
Cup with Handle:
This is one of the most common trading patterns that begins after a stock makes at least a prior up trend of 30%. That's the first thing to look for on a chart. Your first sign that this stock has shown at least some power in 30% or more growth in its price.
The next typical trading activity is to see the stock's price pull back, where in effect it is taking a break. This is where you'll see a base forming on the chart, or what we call a consolidation pattern. That holding pattern is key, since it's the area that weeds out the less committed stockholders and provides a launch pad for the stock to perhaps move up in price. Any stock requires support of strong buyers to make major price moves.
You will find that the entire base pattern should last at least 7 weeks and can be as long as a year and a half. The stock will usually not correct more than 30%, but many historical patterns have corrected as much as 50% in a severe bear market. Much of chart reading is common sense. In strong markets, you'll see stronger patterns, given three-fourths of all stocks follow the general market trend.
So, once you've identified this basing pattern, then you'll want to go through each week and look at the action. Again, you'll understand and see more clearly by linking to the above-mentioned areas for the specific signs of this Cup with Handle pattern.
To help remember the elements of a base, it may help you to make a checklist that you can use to search for stocks showing this emerging strength in their patterns:
Is there a prior up trend of at least 30%?
What type of base is it?
Is the base long enough?
Are there signs of strength and support in the base?
Where is your precise buy point?
Is there a breakout on heavy volume?
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