Waning Pattern Strength?
It’s when a breakout setup
proliferates and comes in successive waves of stock that you know you’ve got the
wind at your back. We’ve seen that January, as inverted cup-with-handles
breakouts multiplied across such stocks and exchange-traded funds as Agile
(
AGIL |
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PowerRating),
the Internet HOLDR
(
HHH |
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PowerRating) and Newport
(
NEWP |
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PowerRating). Â
Something different may be in the air
now. While the past breakouts continues to follow through to the downside, it’s
becoming hard to find new examples setting up even as the Nasdaq cracked below
2000 for the first time in 27 months and the damage spread to the Dow Jones
industrials.
Most of the fruit may be out of the melon
now. Be on guard for the possibility that the market action in future setups may
become more random and volatile rather giving you clean moves following a break
below the pivot. While you can continue to trade the pattern, I’d be looking to
hold onto gains in past entries rather than pushing hard into new positions.
Zygo
(
ZIGO |
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PowerRating) and Lightpath
Technologies
(
LPTH |
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PowerRating) broke out of inverted cup-with-handles Monday. Optical
Communication Products
(
OCPI |
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PowerRating) and GlobeSpan
(
GSPN |
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PowerRating) appear to be
setting up.
