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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Trade in Assurant

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Industrials (^DJI):
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As of 05/26/2017
21,080 -2.67 0.0%
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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Getting Started in Chart Patterns, Second EditionGetting Started in Chart Patterns, Second Edition book., has a number of my trades described, plus the book is inexpensive.

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The Assurant Trade (AIZ)

Assurant on the monthly scale Assurant on the daily scale

I show two charts of AIZ so that you can understand what I was looking at on the day I placed the trade. The left figure shows Assurant (AIZ) on the monthly scale. The right figure shows Assurant on the daily scale.

Why would I want to buy the stock on the right-most price bar? Think about it before you read more.

Assurant on the monthly scale

Assurant Entry: Monthly Scale

The next chart shows the stock on the monthly scale.

Highlighted are areas of support. I show those circled along a red line that marks the bottom of the price bar on entry day.

In my notes of the trade, I wrote, "Buy reason: This is near the yearly low, resting on support."

 

 

 

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Assurant on the daily scale

Assurant Entry: Daily Scale

This chart shows the entry on the daily scale.

The ABCD labels mark the boundaries of a chart pattern. Can you guess what it is? It's another reason I bought the stock.

The answer is a measured move down chart pattern.

The first leg is the AB move. BC follows that in the corrective phase. Then comes CD, the second leg.

The idea behind the measured move is that leg AB will equal the CD move, both in time and price.

Since the pattern had already completed, I didn't care about the leg length or time. However, I wrote in my notebook, "The leg 1 drop was about 6.50 points and leg 2 was about 9, so it's due for a rebound."

One interesting item about a measured move is what happens when the chart pattern completes. Price often, but not always, rises back to the corrective phase, BC. That gave me confidence to buy the stock and expect an upward move.

Here's the setup.

  • Stock trading near yearly low
  • Support at 32
  • Measured move down chart pattern completed. Expected retrace to the corrective phase. Maybe higher.

Once I had the buy conditions set, I checked the company and other things, some of which are done automatically by my computer program.

  • Next earnings in late July. I won't buy a stock within 3 weeks of an earnings announcement. Too risky.
  • Expect the stock to close higher the next day, based on similar historical moves and the next day's close.
  • One month industry trend: 9 stocks up and 6 down. Two months: 0 up and 15 down. Six months: 8 up and 7 down.
  • Bad news: Average volume is NOT rising consistently over the past 3 weeks, means a HIGHER failure rate.
  • Bad news: The stock's relative strength against the S&P 500 is FALLING.
  • Based on up closes since the 2009 bear market ended, the best day to buy is Wednesday because it has the fewest up closes.
  • The probability of the upward trend continuing (based on 2 consecutive closes) is 21.8%.
  • Company is buying back shares but they have problems going forward.

In my notebook I wrote, "If a good quarter comes in, this could pop. I expect the stock to ease upward."

I estimated overhead resistance was at 39, 42, and 56. Those were my targets.

I bought the stock on June 18, 2012 and received a fill at 33.66.

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The Assurant stock on the weekly scale

Assurant: The Sale

The chart shows Assurant on the weekly scale.

Notice support at 32, shown by the blue line.

As the trade progressed, you can see that an ascending broadening wedge occurred (highlighted by green lines).

When the stock touched the bottom green line for the last time, I added to my position (which I still own as I write this).

As part of my entry setup, I estimated where support and resistance would occur. Those values were at 39, 42, and 56. The stock blew through 39 (the lower red line).

The 42 resistance area (top red line), was a particularly good call.

I set 56 as the exit price. It was a good call, too, because the stock stalled there several times, forming a broadening formation, right-angled and descending (it's hard to see on this chart, but it's the three peaks straddling the Sold label).

Assurant: The Sale Monthly Scale

The Assurant stock on the monthly scale

This chart is on the monthly scale to show where overhead resistance is.

When the stock reached 56, I felt it was fully valued. Time to sell.

However, with a bull market powering stocks higher especially in the insurance industry, I sold only half my position.

A check of the fundamentals (from research reports) says the stock is trading at the top of the 5 year high-low price/earnings band. Price/sales is 0.47 but near the top (0.50) of the 5-year high-low band. Insiders are selling. None are buying, but the amounts, for the most part, are small. 1,250 shares in Sept, 20k in Aug, 1.5k, 10k, and 11k in May, 24k in April, 1.5k in March 2013.

Of course, insiders can sell for a variety of reasons.

I sold the stock on 9/16/13 at 55.94.

On the trade, I made 69% including five dividend payments. Since the buy and sale are over a year long, it's qualifies for long-term capital gains treatment. That's another reason I sold only half of my position (the other half is short term).

-- Thomas Bulkowski

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See Also

  • Actual trades. Here are others I've made.
  • Speaking of trades, check out the quizzes, some of which feature actual trades.
  • Coldwater Creek (CWTR), congestion breakout on entry, hit stop on exit, 83% in 7 weeks.
  • CNO 2.0. Fibonacci retrace on entry, inverted dead-cat bounce on exit. I made 90% in 2 months.
  • Hudson Highland Group (HHGP), head-and-shoulders on entry, hit stop on exit, +55% in 3 months.
  • Vivus, full retrace of gap on entry, sell on symmetrical triangle breakout and bad news, 37% in 7 months.

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