Re: [CANSLIM] cup-without-handle; "tightness" questions

From: Chazmoore@aol.com
Subject: Re: [CANSLIM] cup-without-handle; "tightness" questions
Date: Wed, 7 Aug 2002 11:54:52 EDT

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Ann: You will probably get several responses to your question but let me give
it a try.

The left side of the cup forms when the upward price pressure hits a point of
resistance; that is to say the sellers begin to out number the buyers. The
stock price falls, and may continue to fall, or move sideways, for many
months. At some point the buyers once again find the stock price attractive
and begin buying. Volume increases as the price rises. As the price increases
it crosses an important mid point that is half the distance between the left
side lip and the current low. (If the price does not cross the mid point you
cannot have a c/h formation.) As the price approaches the height of the left
side lip, it will once again hit a level of resistance and begin to fall. The
sellers once again outnumber the buyers. This time however the volume is low
and begins to dry up. This tells us that the sellers are just about finished
but the buyers are lurking in the background waiting to pounce. On the chart
this appears as a downward turning line we call the handle. After a week or
two the buyers begin to come back in and the price heads north. Now we see a
strong increase in volume and we wait for our buy signal. When the price
exceeds the lip formed by the right side of the cup by .10, it is safe to
buy. It continues to be a safe buy until the price exceeds this pivot point
by 5%.

I hope this helps. Be sure to refer to the new tool Mike has made available
to us since it clearly describes each part of the cup/handle on the diagram.
Charley

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<HTML>Ann: You will probably get several responses to your question but let me give it a try.
 
 The left side of the cup forms when the upward price pressure hits a point of resistance; that is to say the sellers begin to out number the buyers. The stock price falls, and may continue to fall, or move sideways, for many months. At some point the buyers once again find the stock price attractive and begin buying. Volume increases as the price rises. As the price increases it crosses an important mid point that is half the distance between the left side lip and the current low. (If the price does not cross the mid point you cannot have a c/h formation.) As the price approaches the height of the left side lip, it will once again hit a level of resistance and begin to fall. The sellers once again outnumber the buyers. This time however the volume is low and begins to dry up. This tells us that the sellers are just about finished but the buyers are lurking in the background waiting to pounce. On the chart this appears as a downward turning line we call the handle. After a week or two the buyers begin to come back in and the price heads north. Now we see a strong increase in volume and we wait for our buy signal. When the price exceeds the lip formed by the right side of the cup by .10, it is safe to buy. It continues to be a safe buy until the price exceeds this pivot point by 5%.
 
 I hope this helps. Be sure to refer to the new tool Mike has made available to us since it clearly describes each part of the cup/handle on the diagram. Charley</HTML>

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