A Simple Defined Pattern

Before the open,
one participant in our chat room at TradersWire Interactive was talking about a
potential setup for Siebel Systems Inc. (SEBL),
so I decided to check the stock. Yesterday, Siebel reported its second-quarter
earnings of 15 cents a share, beating analysts’ expectations of 13 cents a
share. So far, so good, but the company also warned its fourth-quarter profits
would be four cents lower than the year ago. I looked at pre-open activities.
Siebel was trading almost 7% lower. Indeed, it could be setting up a profitable
pattern.

I’m sure some of you were hoping to see a weak open, preferably a gap down,
followed by a quick recovery. In fact, that’s what the stock did, except for the
gap down. It opened weak and immediately fell below yesterday’s low in the first
five minutes of trading. After 15 minutes of sideways trading, Siebel began to
rally. This was the buy entry point traders were waiting for. In less than 15
minutes, the stock gained nearly 2 points.

Shortly after 10:00 a.m., while some of us were still celebrating a quick Siebel
profit, Kevin Haggerty made a comment on Siebel in the chat room: “Save
your five-minute chart as an example of an extended down with reflex bounce from
a simple defined pattern.” So, as Kevin recommended, let me show you the
five-minute chart below as chart of the day.

Till tomorrow,

Eddie