As Good As It Gets
One of the more difficult patterns for novice traders
to master is the cup-with-handle. Yet it is one of the most uniquely useful
patterns for identifying powerful, sustained moves.
Late in Friday’s session, I talked to a successful, but reclusive West Coast
trader who pointed his admiration for the setup in GSI Lumonics
(
GSLI |
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PowerRating).Â
Lately, we have been seeing some rather deformed
cup-with-handles. Some of them have broken out with or very short or
non-existent handles. Others have had handles that form above the top of the
left side of the cup.Â
This trader I spoke to told me that while this particular
instance was not the ideal representation of a cup-with-handle, it was as good
as you could expect in the current environment. The fast plunge we had in
late March/early April produced a sharp bottom, from which many high-quality
stocks have staged impressive recoveries. So GSLI is lacking a flat base.
But other things fell into place. The
handle was the right length–about three-weeks. Volume surged on the breakout
from the handle. The handle was at the same price level as left side of the
cup.Â
What is interesting is that the traders I’ve spoken to who use
the cup-with-handle are comfortable with the many wide variations of it they
see. It is the novices who are not.Â
This reminds me of something very profound that Mark Boucher
says in his 10-week
trading course.Â
If you want to improve your results as a trader, your main
goal should be to understand the markets, and not master any one strategy,
indicator, or methodology.
When you understand the markets, you
can survive and thrive as a trader, even when all you have is something that has
a vague resemblance to a cup-with-handle.
Have a great Fourth,
Eddie