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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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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 01/20/2017
19,827 94.85 0.5%
9,225 60.61 0.7%
658 0.48 0.1%
5,555 15.25 0.3%
2,271 7.62 0.3%
YTD
0.3%
2.0%
-0.2%
3.2%
1.5%
Tom's Targets    Overview: 01/18/2017
19,250 or 20,250 by 02/01/2017
8,800 or 9,500 by 02/01/2017
685 or 630 by 02/01/2017
5,700 or 5,400 by 02/01/2017
2,200 or 2,350 by 02/01/2017
Indus strength: None YTD
Mutt Losers: None YTD
Mutt Winners: None YTD

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April 2008 Headlines


Archives


Wednesday, 4/30/08: EWZ: Rising Wedge Seen in Brazil!

iShares MSCI Brazil Index fund (EWZ) on the daily chart

Take a close look at the chart. See anything weird? I'll tell you what I found at the end of this posting.

EWZ is an exchange traded fund that approximates the movement of Brazilian securities. First look at the head-and-shoulders bottom that appears near the top of the chart. Usually you see HSBs near the bottom of the chart, but I have seen many of these "continuation" patterns recently...or at least my eyes are drawn to them. They are bullish.

Now take a look at the rising wedge. Wedges are not the best patterns to trade, but I cannot articulate why, exactly. They are not easy to spot, certainly. Look for two rising and converging trendlines. I show them in red. The only reason I think price will follow the green line is because price is already falling. If it punches through the bottom trendline, then the target is the bottom of the chart pattern, about 64, which price reaches just 46% of the time. A full 69% of rising wedges breakout downward, by the way.

Notice the valley at A. Price could drop to this support level and rebound. One clue of that happening will be a second gap on the chart. We already see a breakaway gap (B), which "breaks away" from a congestion area and starts a trend. Another gap would likely be an exhaustion gap, meaning that the trend is about to reverse. That could come tomorrow (I am writing this on Tuesday night, April 29).

Whether the ETF will follow the green line or just continue downward is anyone's guess. I just get a feeling that it has more work to do between the trendlines before it punches through one way or the other.

What's weird with the chart? Brazil is spelled wrong.

-- Thomas Bulkowski

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Tuesday, 4/29/08: CLR: Not a Rust Remover

Continental Resources (CLR) on the daily chart

I bought a bottle of CLR stain remover and found that it did not work as advertised. You usually see those ads around the holidays, but the CLR I am talking about in this post, is not a stain remover. It is Continental Resources Inc. I last discussed this company on April 8, when I said the stock was the best performing stock in the best performing industry. It still is, but the stock relative strength has slid to 2 (1 is best) out of 551. Back then the price of the stock was at 33.10. It's now at 46.54.

What caught my attention is the high and tight flag. A HTF is not a normal flag chart pattern. A flag is a congestion region bounded by parallel lines. A high and tight flag is a congestion region that forms after price doubles in less than two months. That is what happened to CLR when price climbed from A to B. I show a nearby congestion region circled. That might as well serve as the flag even though it looks like a pennant. The flag portion of a HTF can be any shape.

Price has closed above the top of the congestion area, giving a buy signal. But is the stock a buy?

HTFs make me nervous because you are buying after price reaches the height of the dead zone on Mount Everest. You are banking that the stock will continue higher, usually 50% of the prior up move, meaning 12 more points to 60.

To answer the buy/no buy question, I would be cautious here. HTFs with a straight-line run higher than 45 degrees have a tendency to do less well. Of course, trying to measure the angle is difficult because of the aspect ratio (just move the y-axis and the angle changes. Thus, what looks nearly vertical can appear almost flat on another screen). I think the stock will continue moving up but I am too cautious about this one to invest. You may decide otherwise. This stock is certainly more promising that VRTX, another HTF which I also discussed. That stock is worth studying before buying this one. Good luck!

-- Thomas Bulkowski

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Monday, 4/28/08: How to Make 20% by Getting WIREd

Encore Wire Corp (WIRE) on the weekly chart

I show two charts of Encore Wire (WIRE), one on the weekly scale and the other on the daily. Price formed a rounding bottom, outlined by the green line. Rounding bottoms are not the easiest chart patterns to identify because the turn is slow, long, and you are searching for it midway through development. The weekly scale makes identification easier, so try that. Look for a graceful turn, supported on the bottom by a congestion zone. I show WIRE on the weekly chart in the bottom figure. See how graceful the rounding turn looks.

On the daily chart, notice the abrupt move up from A to B with price at C returning back to near the launch price of A. This brief move up (forming a double bottom, really) is common for rounding bottoms after the stock passes the midpoint. If you see this behavior, you can buy in with confidence near C. It does not always occur but when price sinks from B to C, it is no time to panic. It should find support at the bottom of the turn. And if not, then a stop placed below support will help limit the loss.

Encore Wire Corp (WIRE) on the daily chart

I bought the stock with a buy stop at B, when price moved above the congestion zone. If you cover up the right part of the chart after B, then you can see how I might think that price would continue moving up in a rounding turn. The brief climb to H I thought was the common bump up that I expected (instead of the A B C move).

My buy stop was at 17.73 and the order filled at 17.72. On the buy day, price peaked at 17.93 and in the coming days, the stock plummeted like a skydiver jumping off a cliff, bouncing off the rocks along the way down. The company serves the home building industry, which is weak, and that made me nervous as price dropped. Low priced stocks tend to be more volatile than high priced ones, so I hung in there. I saw the long support zone setup by the rounding bottom and hoped that price would find support at 15 or above. I set my stop at 15.16, or 14.4% down from the buy price. At C, I came within 3 cents of being stopped out.

After bottoming at C, the skydiver began climbing back up the mountain. Last Wednesday, the company announced earnings after the close of trading. I read the announcement and thought that it sounded positive, but anything can happen to price; the market decides whether or not it is better than expected. The gap up shows its conclusion.

I happened to be adjusting my stops online just after the market opened and saw the stock was up dramatically. I thought about it and decided to sell, receiving a fill at 22. The reason for selling is I believe that price will retrace some of the gain to D, but how far price drops is anyone's guess. After the retrace, I expect the stock to climb again to E where it should run into overhead resistance setup by the flat tops at G, but it could stop earlier (anywhere from 24 to 27). Then it should form a handle, F, a congestion region to the right of the cup lip. After that, expect price to move up, but that is well into the future. In short, I sold because I did not want to give back my hard earned gains in this volatile market. As the saying says, if the market gives you a gift, take it. I made 24% in about 2 months.

How can you duplicate this trade in other stocks and earn over 20%? Here's what to look for.

  • Find a developing rounding bottom or cup with handle pattern. Try the weekly scale for easier identification.
  • Buy near the bottom of the cup, if possible.
  • Expect a bump up somewhere after the mid point, but it does not always occur. See rounding bottoms for more details. For a lower entry price, buy into the stock after the bump returns price back to near the launch price. Often price will stop just above the launch price.
  • Place a stop below the bottom of the cup or other support region. Move it up as price rises.
  • Look for overhead resistance that would form the right cup lip and sell when price nears or reaches it.
  • Do not expect a handle to form and price to continue rising after the right cup lip. It may not.
  • Price may form a descending scallop, so watch for that to occur and trade appropriately.

Here are some stocks forming rounding bottoms. Some are in the early stages of development and may not be rounding turns at all. Others, like WIRE, are already well underway. Also, Eagle Materials (EXP) formed one from July 2007 to mid October 2007 and then price died. It is worth a closer look just to see what a failure looks like.

-- Thomas Bulkowski

Symbol Chart Pattern Start End
ASFRounding bottom10/31/200704/25/2008
AAPLRounding bottom01/14/200804/25/2008
BECNRounding bottom05/30/200704/25/2008
CDIRounding bottom12/24/200702/28/2008
CLXRounding bottom12/26/200704/25/2008
WIRERounding bottom10/02/200704/17/2008
FRDRounding bottom10/22/200704/25/2008
PMTIRounding bottom10/10/200704/25/2008

 

Definitions
RS is relative strength (where 1 is best). For others, see the glossary.
’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate.
All numbers assume a bull market and are based on the breakout direction that occurs most often.
For more information, consult my book, Encyclopedia of Chart Patterns, Second Edition.

Finding patterns more recent than 01/25/2008.

 
Administaff Inc (ASF)
Industry: Human Resources
Industry RS rank: 25 out of 45
Stock RS rank: 489 out of 548
Latest close as of 04/25/2008: $25.91
1 Month average volatility: $1.02. Volatility based stop: $23.46 or 9.5% below the close.
Change year to date: -8.38%
Volume: 226,300 shares
3 month average volume: 285,095 shares
 
Chart pattern: Rounding bottom continuation pattern from 10/31/2007 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Apple Computer Inc. (AAPL)
Industry: Computers and Peripherals
Industry RS rank: 37 out of 45
Stock RS rank: 277 out of 548
Latest close as of 04/25/2008: $169.73
1 Month average volatility: $5.09. Volatility based stop: $156.24 or 8.0% below the close.
Change year to date: -14.31%
Volume: 35,445,400 shares
3 month average volume: 41,958,485 shares
 
Chart pattern: Rounding bottom continuation pattern from 01/14/2008 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Beacon Roofing Supply Inc. (BECN)
Industry: Retail Building Supply
Industry RS rank: 14 out of 45
Stock RS rank: 40 out of 548
Latest close as of 04/25/2008: $11.29
1 Month average volatility: $0.44. Volatility based stop: $10.18 or 9.9% below the close.
Change year to date: 34.09%
Volume: 881,900 shares
3 month average volume: 717,857 shares
 
Chart pattern: Rounding bottom continuation pattern from 05/30/2007 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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CDI Corp (CDI)
Industry: Human Resources
Industry RS rank: 25 out of 45
Stock RS rank: 179 out of 548
Latest close as of 04/25/2008: $26.89
1 Month average volatility: $0.91. Volatility based stop: $23.80 or 11.5% below the close.
Change year to date: 10.84%
Volume: 157,000 shares
3 month average volume: 134,645 shares
 
Chart pattern: Rounding bottom continuation pattern from 12/24/2007 to 02/28/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Clorox Co, The (CLX)
Industry: Household Products
Industry RS rank: 17 out of 45
Stock RS rank: 316 out of 548
Latest close as of 04/25/2008: $54.94
1 Month average volatility: $0.79. Volatility based stop: $52.71 or 4.1% below the close.
Change year to date: -15.70%
Volume: 1,045,100 shares
3 month average volume: 1,511,677 shares
 
Chart pattern: Rounding bottom continuation pattern from 12/26/2007 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Encore Wire Corp (WIRE)
Industry: Metals and Mining (Div.)
Industry RS rank: 15 out of 45
Stock RS rank: 106 out of 548
Latest close as of 04/25/2008: $23.10
1 Month average volatility: $0.76. Volatility based stop: $21.30 or 7.8% below the close.
Change year to date: 45.10%
Volume: 621,500 shares
3 month average volume: 459,018 shares
 
Chart pattern: Rounding bottom continuation pattern from 10/02/2007 to 04/17/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Friedman Industries Inc (FRD)
Industry: Building Materials
Industry RS rank: 26 out of 45
Stock RS rank: 503 out of 548
Latest close as of 04/25/2008: $5.24
1 Month average volatility: $0.15. Volatility based stop: $4.90 or 6.5% below the close.
Change year to date: -17.48%
Volume: 7,800 shares
This security may be thinly traded (less than 100,000 shares)!
 
Chart pattern: Rounding bottom continuation pattern from 10/22/2007 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Palomar Medical Technologies Inc (PMTI)
Industry: Medical Supplies
Industry RS rank: 29 out of 45
Stock RS rank: 517 out of 548
Latest close as of 04/25/2008: $13.37
1 Month average volatility: $0.52. Volatility based stop: $12.05 or 9.9% below the close.
Change year to date: -12.73%
Volume: 191,400 shares
3 month average volume: 429,158 shares
 
Chart pattern: Rounding bottom continuation pattern from 10/10/2007 to 04/25/2008
Performance rank: 5 out of 23.
Breakout is upward 100% of the time.
Average rise: 43%.
Break-even failure rate: 5%.
Throwbacks occur 40% of the time.
Price meets the measure rule target 57% of the time.
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Thursday, 4/24/08: Hong Kong (EWH) Up Move at Risk

Hong Kong EWH) on the daily chart

Shown is the MSCI Hong Kong Index Fund (EWH), an exchange traded fund, on the daily chart. Price has formed a confirmed head-and-shoulders bottom. When I say "confirmed," I mean that price has closed above the green, down-sloping, neckline, verifying that the pattern is a valid one.

Price is likely to rise, but how far? To answer that, we look for overhead resistance and I see it setup by a congestion area in mid January. That is at the round number of 20. Round numbers often are places that show support or resistance. You can see price stopping near 20 in several locations, such as in mid to late November, and the circled red congestion area.

Above that is a breakaway gap. The gap, coupled with the tight knot of congestion just above it (circled in blue), and the circled congestion below, suggests this ETF will have a difficult time moving above 22. I think it likely that price will climb above 20, with some hesitation, but then bounce between 22 and 20. Market trends after that will determine the breakout direction.

I show the projected path of price in magenta on the right side of the chart. If you decide to trade this one, do so with care and pay attention to world markets.

-- Thomas Bulkowski

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Wednesday, 4/23/08: Stop Practice

Yahoo did not update their quote information on 19 stocks that I follow, so it threw me off, put me in a bad mood, and delayed this posting. Thus, today we are going to review stop placement in a moment. But first, I have plans to create a number of sample portfolios, just to test various methods to see how they work in real life. The relative strength index will be featured along with industry and stock relative strength, maybe a moving average thrown in, and the Stan Weinstein approach to long term investing.

Prompted by one of the readers of this blog, you will notice changes in its appearance. I consider my website to be the main attraction with the daily blog as a side show. Many of you may disagree about that, but it is changes to the blog where my focus has been. I changed the background color from blue to white and developed a new layout with a menu bar along the top and a nav bar running down the left side. Today (4/22), I replaced the menu bar with buttons, but I still have work to do (the buttons need to be narrower so the horizontal scroll bar does not appear.

I plan to investigate RSS feeds but haven't a clue as to how to implement something like that. If you know, then please share it with me. That will save me some time. My watch list has taken on a new appearance as will the Patterns for the Weekend page (Friday's). If you click on the stock symbol, a number of details about the stock and the chart pattern will appear. That will help you filter out stocks. Right now, the table is 4 columns wide (symbol, chart pattern, start and end dates) and I have room for a few more. If you have any thoughts about what you would like to see there, then let me know (such as the last closing price or volume). In the detailed stock display (after you click on the stock symbol), I can put any details from my Encyclopedia of Chart Patterns book, but have included what I think is important and useful. If you want additional information (almost any info from the tables in my book, I can stuff it in the list), then let me know. As always, I can be reached at My email address

# # #

Apache (APA) on the daily chart Let's talk about stop placement. Many of you will know to place a stop below a support zone, such as a minor low or region of tight horizontal price movement, but what do you you do with the situation pictured in the chart?

I picked this from the #1 performing industry, one I wrote about on April 8. If you noticed the broadening top with a partial decline at A (which happens to rest on a 38% Fibonacci retrace of the prior up move) and bought in, stop placement was easy. You just placed it a few pennies below A. Now that price has climbed to B, placing the stop below a support zone would be foolhardy. The nearest support zone is a small knot of congestion circled in green (if you look closely, you can see a closer one, just above the volatility stop line, but ignore it).

You can use a Fibonacci retracement of the AB move. To do that, you take 38% (or 50% or 62%) of the difference between the two end points and subtract it from the top point: Stop Price = B - (38% x (B - A)). To plug in numbers, we have: 143.67 - (38% x (143.67 - 103.5) or 128.41. I show the approximate level on the chart as a blue line. That stop location (128.41) is well below the 143.67 close, so it is not the ideal case.

A better method is to use a volatility stop. My free Patternz program will calculate it for you and if you are lucky, it also appears on my watch list and new Patterns for the Weekend page (coming this Friday). If not, then refer to my volatility page for the calculation. The idea behind the stop is to place it far enough away so you do not get stopped out on normal price volatility. I show the volatility stop as a red line.

When I place a stop, I always check the volatility stop setting before deciding where it should go. In a case where a straight-line run is occurring, such as in APA, a volatility stop can keep you in the trade longer than using other methods.

-- Thomas Bulkowski

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Tuesday, 4/22/08: Is Down Under (EWA) Looking Up?

The MSCI Autralian Index fund (EWA) on the daily chart

After the release of my first book, Encyclopedia of Chart Patterns, I remember seeing a note on Amazon.com that it was ranked 5 for sales in Australia. So I think it is fitting tribute that I discuss the MSCI Australia Index fund (EWA), shown on the daily chart. This is a busy chart with lots of lines, so let's walk through each of them.

The long green line is a trendline connecting the peaks. Price closed above the line today (I am writing this on Monday evening, April 21), but it has closed above it before.

There is an ugly double bottom at valleys A and B which has not confirmed yet because price has not closed above the peak between the two bottoms. Waiting for confirmation in this case is probably a wise course of action. I will tell you why in a moment (the word gaps is a hint).

A head-and-shoulders bottom appears, too, but it is not a pretty one (and that may be good because well-formed HSBs tend to fail more often...I think). The left shoulder (LS), which actually extends backward to the beginning of February, is much wider and rounding looking than the right shoulder (RS) but the distance about the head makes it look symmetrical. I like symmetry in head-and-shoulders patterns. Price has closed above the red neckline, confirming the head-and-shoulders as a valid reversal chart pattern.

Overhead resistance appears as a knot of congestion (circled) at 29.

What bothers me most about this chart is the price action. Look at some of the gaps when price moves up. The next day, or within a few days, price has a tendency to drop back down. It happened a few days ago, back in February, and 3 days after the low at A. So, my price forecast shown by the magenta line, assumes price will drop, climb up to resistance at 29 and struggle there before moving higher. I can see this moving up to 32 or higher in the longer term.

Assuming a buy stop at 28,45 (confirming the ugly double bottom), a stop placed at 27.04 would work for volatility and it is below a small minor low. That is a potential 5% loss. If you want a safer bet, a stop below the RS low on April 14 at 26.07 would work better. That represents an 8% loss, and it is the stop location I like best.

-- Thomas Bulkowski


Monday 4/21/08: More Up for the Dow? Yes and No!

The Dow Industrials (^DJI) on the daily chart

The chart shows the Dow Industrials on the daily scale. Peaks 1, 2, and 3 align like an unconfirmed triple top with the peaks near each other in price. A red trendline drawn along the peaks and another drawn along the valleys show an ascending triangle chart pattern. Those breakout upward 70% of the time, according to my studies of the pattern.

On Friday, price closed above the top of the pattern, busting the triple top (it is no longer a triple top) and confirming the ascending triangle. Much to my surprise, I expected price at A to continue lower (see my April 14 blog posting), eventually touching the bottom trendline before rebounding. That didn't happen.

The key question is, where does the average go now? Before I answer that, let's look at the rest of the market. The Dow utilities have been posting higher highs for 4 days now, and it looks like it needs a rest. The transports are moving up following a channel. It might climb for another day before dropping to the bottom of the up-sloping channel. The Nasdaq composite shows a confirmed head-and-shoulders bottom, but overhead resistance is nearby. The S&P 500 has made a strong run for several days now and it has reached overhead resistance. It might climb for one more day before running into trouble.

In short, the other indices look like they are running out of steam.

On the weekly chart, could the industrials be forming a complex head-and-shoulders top, one that I predicted in my February 1 posting? I'll stick my neck out and say here is how I think things will turn out. I expect the Dow to throwback to the top of the triangle. That may occur as soon as tomorrow (I am writing this on Sunday evening), chiefly because the Dow has been moving up for several days now. However, the typical (and rarely do things play out in the typical manner) throwback sees price move higher after the breakout for 3 days, curl around, and return to the top of the triangle by day 10. It may continue lower for many days, but I think that unlikely because of the triple top peaks supporting the average.

Once the throwback completes I expect the up-move to resume. How far will the Dow rise? There is overhead resistance, but it's light until we reach 13,500, which is my target. The above chart shows overhead resistance by the green horizontal lines. Most of those are weak, but the one at 13,500 has several peaks not shown lending strength to it. I will guess that the Dow will be at 13,500 within a month.

-- Thomas Bulkowski


Thursday, 4/17/08: Rise and Fall in PXE

The PowerShares dynamic Energy ETF (PXE) on the daily chart

The chart shows the PowerShares dynamic energy (PXE) exchange traded fund on the daily scale. I highlight a confirmed head-and-shoulders bottom chart pattern. Price closed above the blue neckline, suggesting the upward move would continue and continue it did. Price has climbed to A. To the right of the vertical red line is what I think will happen. Since price has gapped upward, it is likely to continue moving higher for the next few days. Then I expect the ETF to round over at the top and pitch downward, returning to the neckline or at least approaching it. Following that, I expect a resumption of the up move.

I think many will agree that with summer approaching, the price of energy will continue to rise due to climbing demand and a falling dollar (the price of oil is sold in US dollars, so when the US dollar falls, the price of oil grows more expensive). Seasonal trends also suggest demand for energy with the heat of summer and people vacationing (driving or even flying). Demand has fallen for gasoline, according to one news report but you can't tell that from the rising pump price. Anyway, that is my way of justifying what I think will happen to the price of PXE. I would not chase it upward now. Wait for the throwback and when price turns up again (whether or not it actually reaches the neckline), then that would be a better time to buy.

-- Thomas Bulkowski

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Wednesday, 4/16/08: Tough Times for Tech?

The Nasdaq Composite on the daily chart

The chart shows one view of the Nasdaq Composite. Each of the red A B C points on the left mirror the ones on the right. The red line running vertically is my guess at what Nasdaq will look like in the coming days or weeks. I expect the index to move higher in the short term, perhaps boosted by an earnings announcement from IBM today (I am writing this on 4/15, evening, so I really mean the 16th) after the close. But then I expect another downward spike at C to mirror the one on the left. Following that, I expect price to recover, moving up and forming a large bowl shape.

None of this may actually occur, but it is worthwhile to plan. And if you doubt how often this works, take a look at my blog entry on home construction.

-- Thomas Bulkowski

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Tuesday, 4/15/08: MOS Gathers No Bears

I want to spend today's entry examining a company called Mosaic (MOS), just to highlight the process that I undertake when looking at a company. Mosaic is in the fertilizer and agricultural chemicals business. It is a newbie on the market because it started operations as a public entity in 2004 with the combination of IMC Global and Cargill Crop Nutrition. The company is the world's leading producer of potash and phosphate crop nutrients, according to the company's website. Operations are worldwide and that is important. While the US market is mature, Asia and Latin America (principally, China, India, and Brazil) represent growing markets in both population and income levels, boosting the need for grain production, according to a research report from Standard & Poors. While the S&P 1500 composite index has declined 10.3% this year, the fertilizer business has moved up 0.2%, after sprouting 108% last year, versus a rise of just 3.6% for the S&P 1500 composite.

On a fundamental basis, the beta for MOS is 1.00, meaning it fluctuates the same amount as the market. The price to earnings ratio is 38, and that is high according to Yahoo!Finance. The industry has a P/E of 29, so you are not buying cheap. Long term debt to equity, at 33%, is below the industry average of 39%, which is a good thing. Net profit margin is a whopping 24% versus 10% for the industry. In January, S&P raised its corporate credit rating of MOS from BB to BB+. On April 4, the company said that the environment for potash and phosphates is exceptional, with prices for phosphate more than doubling from a year ago. Potash is up 53% to $221 per ton. Revenue for the first 3 quarters of the fiscal year ($6.3 billion) total more than all of last year ($5.8 billion). They made more profit in the third quarter ($1.17/share) than they did during all of last year ($0.95).

In short, it sounds like business is good.

Insider buying and selling is nothing to write home about. Three insiders sold in January (less than 5,000 shares total), but in late November, 8 bought 3,452 shares each and one bought nearly 7,000 shares. The insiders buying the same amount makes it sound like some sort of company distribution instead of them plunking down their hard earned greenbacks for stock.

Ford Equity Research, which is one of the two that I follow and depend on, rate the stock a strong buy. Of prime interest is their take on price action. They say that "MOS's stock price is up 327.5% in the last 12 months, up 22.6% in the past quarter and up 13.6% in the past month. This historical performance should lead to above average price performance in the next one to three months." One of these days, when I have the time, I am going to reverse engineer their numbers and test them. But that has to wait for another day. According to Ford, annual sales are up 48% in the last year and operating earnings per share is up nearly 600% over the same period. Earnings ("showing strong acceleration") and price momentum is "very positive" (the highest rank for each) but the stock is overvalued when compared to the industry, the earnings yield, and relative to the universe of stocks that Ford follows. In other words, if MOS stumbles, investors will likely not take kindly to the news.

Mosaic on the daily chart

As a backdrop to all of this good news is a soaring stock. The chart shows the trend: upward. Notice the two high and tight flags. Whenever someone says that only low priced stocks show HTFs, point to this stock. Price doubled in less than two months, both times.

Recently, a head-and-shoulders bottom appeared with a green line posing as the neckline connecting the two armpits. A buy signal occurs when price closes above a down-sloping neckline or above the right armpit high for an up-sloping neckline. The difference in the buy signals between the down and up sloping necklines is that price may never reach a steep up-sloping neckline. That's why the armpit high is used instead.

Price gapped higher at A after the announcement of earnings, so the market liked what it heard. Would I buy the stock now? Hold on a minute. We're not done with the analysis yet. What about the industry? What about my notebook entry which serves as a checklist?

The Industry

Comparatively few companies compete in the fertilizer industry. Here is the list:

Agrium Inc. (AGU). This could be forming two patterns, either an ascending triangle or a triple top. Price moved up strongly yesterday when the market was down, so it could bust out of those patterns (confirming the triangle) by continuing the rise.

Monsanto Co. (MON). This is forming a W type consolidation pattern since January. The April 2 earnings release was well received because price moved up after the announcement. This might be forming a 2B pattern (price reaches the level of an old high and then reverses).

Potash Corp of Saskatchewan (POT). This is making a new high after a number of pipe bottoms over the last 9 months. In March, it broke out upward from an inverted roof pattern, which is bullish.

Scotts Miracle-Gro (SMG). This is the weakest of the bunch. Price is near the yearly low, loosely forming a symmetrical triangle from January or a triple bottom starting in March. I would want to know why it is so weak. Long term debt to capitalization is high, at 68%, compared to 20% for many others in the industry.

Syngenta AG ADS (SYT). I do not follow this one.

Terra Industries (TRA). This one is clawing its way up to the yearly high but it has more to go. A recent horn bottom in March was bullish but I expect price to stall when it reaches the height of the two prior peaks in January and February.

UAP Holding (UAPH). This one is in the process of merging with Agrium, so I do not follow it. The stock has flat-lined like road kill.

I show the diversified chemicals industry as ranking third out of 48 industries that I follow. One is best, so this is well up the list and it suggests price for the industry is moving higher. The stock relative strength for MOS is ranked second out of 547 stocks. One is best. S&P ranks the stock 97 out of 99 (highest), says that volatility is high, and that the company "investability quotient percentile" is 88, where 100% is highest.

Notebook

Most of the checklist has already been covered by the above analysis. Earnings were released April 4, so look for the next release to occur in July. In other words, there is no danger of an earnings release taking the stock down anytime soon.

Volatility is indeed high with my program telling me to place a stop no closer than 109.52, or 13.4% below the close of 126.40.

Target price: I have no target. The measure rule for the head-and-shoulders bottoms appears to already have been met.

Since price is breaking out to new highs, there is no overhead resistance except round numbers, such as 130. Downside, there is a small congestion of support at 120 and it appears as an upward pointing flag. I would not expect it to support price, so I would expect a lower drop if price were to reverse. Certainly, the stock should find support near the head-and-shoulder lows of 90 to 96. Maybe the 100 round number would support it, but that hasn't happened in the recent past.

Indicators: I follow three. Wilder's relative strength index is mid range but near over-bought territory. There might be a hint of bearish divergence if you connect the tops of the RSI with a line. I look for divergence with peaks 1 month apart, so this is wide, since the peaks begin in January. The commodity channel index says sell 3 days ago but price has continued to rise since then. Go figure. No failure swings and no divergence to worry about. Bollinger bands are widening and that means a big move has already occurred (the gap caused by the earnings announcement).

If you look at the stock on the weekly scale since the merger, you will see a flat base followed by price busting up and out of the trading range in October 2006. It has been moving higher ever since. Recently, price has gotten a bit sloppy -- loose looking -- if that makes any sense. Instead of trending, it has been moving sideways with a slight upward tilt. Price could continue to move up in the short term because of the demand for its products world wide.

Would I buy the stock? No. At $126 per share, this one is too expensive for my taste. Of course if I had said that at the beginning of this blog, it would have saved me 2+ hours of work. But that's the way it goes. I also considered it too expensive a year ago when it traded at 26. Oops.

-- Thomas Bulkowski

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Monday, 4/14/08: Dow Industrials Turning Down

Dow Jones industrials on the daily chart

First, a few announcements. On the upper left of this page ("Navbar" section), you will see a link to the Blog Archives, which I released this weekend. There, you will find my prior blog postings, highlighting my trades plus worst and best predictions. Some of it is still under construction.

Second, I'd like to thank all of you that purchased a copy of my latest book, Encyclopedia of Candlestick Charts, especially if you did so through this website (meaning you clicked on one of the Amazon.com links to take you to Amazon). As you know, at no additional cost to you, they pay for the referral on most items purchased while at Amazon, and that helps support this site. I want this blog and the hundreds of pages of information available on my website to be accessible to all, free of charge, without any membership dues or registration process. Between those of you that click on ads of interest and the Amazon.com referrals, I see no reason to make this site one that charges for access. Thanks again to those of you that helped launch my new book!.

The chart shows the Dow Jones industrials on the daily chart. Peaks 1, 2, and 3 form an unconfirmed triple top. That is a bearish pattern but only if it confirms. Confirmation will occur when price closes below the lowest valley in the pattern. Currently, that is a close below 11,634, which I do not expect to happen.

The two red trendlines highlight an ascending triangle. That chart pattern is bullish, but price has to breakout upward first. If that were to occur, overhead resistance show by the blue trendline might have something to say about the average moving too much higher. My guess is it would stall there for a few days (dropping somewhat), but eventually pushing through. For now, I think the trend is lower as the green arrow shows. Price is likely to touch the lower red trendline and then turn higher. But you never know. Price could retrace the large 256 point drop on Friday and push through the top trendline. I do not think that is likely because the GE report has the market nervous. It will need time to digest this before turning positive again. Besides, the chart pattern indicator says the market is in sell mode anyway.

-- Thomas Bulkowski

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Thursday, 4/10/08: The Best Pattern: High and Tight Flags

VRTX on the daily chart

According to the statistics from my book, Encyclopedia of Chart Patterns, Second Edition, the high and tight flag (HTF) is the best performing chart pattern with a 69% average rise after a breakout and a break-even failure rate of 0%. That only means I didn't find any patterns that climbed less than 5% after price closed above the top of the pattern. Do not expect that your HTF will rise by 69%, either. Use the number only as a comparison with other patterns from the book.

I show a chart of Vertex Pharmaceuticals (VRTX) as an example of an HTF in progress. To qualify as a HTF, price must climb at least 90% in 2 months or less, but shoot for at least a double. Then price should move sideways. In a huge number of cases, that will be the end of the pattern because price drops from there. For VRTX, the stock hits a low at A, 13.84, and climbs to B, reaching a high of 26.55 in less than 2 months. Price is forming the flag now. If it closes above B, then that would be the buy signal.

For a good example of what a well-behave HTF looks like, see Stillwater Mining (SWC) (details below).

When searching for the flag portion of the HTF, look for price to move sideways in a tight congestion region. Tight regions tend to lead to better climbs after the breakout. You might consider avoiding those with loose looking flags or flags that are too long (over 5 weeks). And by "flag", I mean a congestion region, not a true flag chart pattern. The congestion region is often irregular in shape.

The volume pattern should trend downward (recede) for the best post-breakout performance, too.

After a HTF forms, then wait for price to close above the top of the pattern. Do not use a trendline break of the flag portion as the buy signal because too many of these patterns will show price failing to move higher even after a trendline break. As the following list shows, many HTFs fail to confirm by closing above the top of the pattern. Wait for the breakout before buying a HTF.

After the breakout, be conservative and look at a 50% move up, but be careful. These rockets go up fast and can return to earth just as quickly.

Here is the list of recent HTFs.

Finding patterns more recent than 01/07/2008.
Number of industries: 45.
RS = Relative strength (where 1 is best).

 

Beazer Homes USA, Inc (BZH). Flag, high and tight from 01/09/2008 to 01/28/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 160
Latest close as of 04/09/2008: $9.29
Volume: 1,292,800 shares
65 day average volume: 2,178,803 shares
Change year to date: 25.03%
Coldwater Creek Inc. (CWTR). Flag, high and tight from 01/22/2008 to 01/31/2008.
Industry: Apparel
Industry RS rank: 39
Stock RS rank: 529
Latest close as of 04/09/2008: $4.77
Volume: 1,927,500 shares
65 day average volume: 3,074,083 shares
Change year to date: -28.70%
E-Trade Financial Corp (ETFC). Flag, high and tight from 01/08/2008 to 01/29/2008.
Industry: Securities Brokerage
Industry RS rank: 45
Stock RS rank: 543
Latest close as of 04/09/2008: $4.21
Volume: 19,054,900 shares
Could not calculate the 65 day average volume. This may be thinly traded.
Change year to date: 18.59%
Furniture Brands International, Inc (FBN). Flag, high and tight from 01/16/2008 to 02/21/2008.
Industry: Furn/Home Furnishings
Industry RS rank: 42
Stock RS rank: 182
Latest close as of 04/09/2008: $12.73
Volume: 923,300 shares
65 day average volume: 820,705 shares
Change year to date: 26.54%
Georgia Gulf (GGC). Flag, high and tight from 01/09/2008 to 01/29/2008.
Industry: Chemical (Basic)
Industry RS rank: 8
Stock RS rank: 510
Latest close as of 04/09/2008: $6.91
Volume: 977,200 shares
Could not calculate the 65 day average volume. This may be thinly traded.
Change year to date: 4.38%
Hovnanian Enterprises Inc (HOV). Flag, high and tight from 01/09/2008 to 01/24/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 223
Latest close as of 04/09/2008: $10.96
Volume: 3,806,400 shares
65 day average volume: 3,537,289 shares
Change year to date: 52.86%
Jo-Ann Stores Inc. Class A (JAS). Flag, high and tight from 01/16/2008 to 02/14/2008.
Industry: Retail (Special Lines)
Industry RS rank: 43
Stock RS rank: 369
Latest close as of 04/09/2008: $16.77
Volume: 382,700 shares
65 day average volume: 374,262 shares
Change year to date: 28.21%
M/I Homes, Inc. (MHO). Flag, high and tight from 01/09/2008 to 01/25/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 70
Latest close as of 04/09/2008: $17.22
Volume: 186,400 shares
65 day average volume: 401,691 shares
Change year to date: 64.00%
Pulte Homes Inc. (PHM). Flag, high and tight from 01/09/2008 to 01/31/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 185
Latest close as of 04/09/2008: $14.01
Volume: 7,180,000 shares
65 day average volume: 7,497,622 shares
Change year to date: 32.92%
Standard Pacific (SPF). Flag, high and tight from 01/11/2008 to 01/25/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 132
Latest close as of 04/09/2008: $5.22
Volume: 3,957,900 shares
65 day average volume: 5,228,092 shares
Change year to date: 55.82%
Stein Mart Inc. (SMRT). Flag, high and tight from 01/11/2008 to 01/30/2008.
Industry: Apparel
Industry RS rank: 39
Stock RS rank: 432
Latest close as of 04/09/2008: $5.43
Volume: 335,300 shares
65 day average volume: 653,391 shares
Change year to date: 14.56%
Stillwater Mining Co. (SWC). Flag, high and tight from 01/22/2008 to 02/08/2008.
Industry: Metals & Mining (Div.)
Industry RS rank: 12
Stock RS rank: 3
Latest close as of 04/09/2008: $17.46
Volume: 1,080,200 shares
Could not calculate the 65 day average volume. This may be thinly traded.
Change year to date: 80.75%
Talbots Inc. (TLB). Flag, high and tight from 01/22/2008 to 03/25/2008.
Industry: Apparel
Industry RS rank: 39
Stock RS rank: 440
Latest close as of 04/09/2008: $12.40
Volume: 1,261,100 shares
65 day average volume: 812,309 shares
Change year to date: 4.91%
U.S. Concrete, Inc. (RMIX). Flag, high and tight from 01/09/2008 to 02/01/2008.
Industry: Cement & Aggregates
Industry RS rank: 36
Stock RS rank: 462
Latest close as of 04/09/2008: $3.97
Volume: 99,700 shares
65 day average volume: 426,672 shares
Change year to date: 19.22%
Vertex Pharmaceuticals (VRTX). Flag, high and tight from 03/11/2008 to 04/04/2008.
Industry: Biotechnology
Industry RS rank: 13
Stock RS rank: 399
Latest close as of 04/09/2008: $26.49
Volume: 2,691,700 shares
65 day average volume: 2,528,577 shares
Change year to date: 14.03%
WCI Communities Inc. (WCI). Flag, high and tight from 01/09/2008 to 01/24/2008.
Industry: Homebuilding
Industry RS rank: 15
Stock RS rank: 505
Latest close as of 04/09/2008: $3.64
Volume: 463,900 shares
65 day average volume: 1,657,143 shares
Change year to date: -3.70%

-- Thomas Bulkowski

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Wednesday, 4/9/08: Measured Move Up in PXJ

PXJ on the daily chart

The chart shows the PowerShares Dynamic Oil & Gas Services (PXJ) ETF on the daily scale. Price is moving up but how far will it travel? There is overhead resistance setup by a trendline (shown as a blue line) connecting prior peaks and meeting just above D. Price closed higher today and that could mean price will continue rising, but I am not so sure.

Looking at the chart in a different way, we see a measured move up chart pattern. Price begins the first up leg at A and it ends $4.53 higher at B. The corrective phase between B and C takes price lower, but then the second up leg begins. And what happens? Price peaks $4.76 higher. That is awfully close to the first leg move of 4.53, just as the pattern predicts in theory, but in practice, the pattern predicts a shorter second leg in dollars, percentage, and time.

Often when overhead resistance appears after a straight line run, as in this case, price will retrace back into the corrective phase. In a measured move pattern, price stops within the corrective phase 35% of the time. Just 19% of the time price remains above the top of the corrective phase (B). A full 31% of the time, price drops below the corrective phase C but remains above the pattern's start (A). Just 15% of the time, price continues lower.

To put it another way, there is an 81% chance that price will move below B sometime in the near future (whatever that means). That still does not guarantee that price will fall instead of continuing the uptrend.

If I owned the ETF, and seeing overhead resistance, I would doubt that the upward move will continue much longer. If today (Wednesday) closes lower then I would sell with the expectation that price will drop to the green circle which highlights a small knot of support. That is my guess as to where price will drop to.

If price continues moving up, then enjoy the ride. You might take a Fibonacci extension of the first leg to project a potential resistance point. That would be 4.53 x 1.38 (38% extension) = 6.25. From the low at C, that would suggest a target of 23.74 + 6.25 = 29.99. Call it 30 and call it a round number (meaning overhead resistance) and a good time to consider selling.

-- Thomas Bulkowski

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Tuesday, 4/8/08: Petroleum Producers, The Best Performing Industry

Continental Resources on the daily chart

Shown is Continental Resources, the best performing stock in the best performing industry in my database. The best performing industry is the petroleum producers, based on the price change from yesterday's close to a close 6 months ago. Within the industry, the stocks were rated for price performance and CLR came out on top. The industry has gained 27.18% over the six months and this stock has gained 63.26%.

Looking at the chart, pattern A is a busted symmetrical triangle. Why do I say it busted? Because price broke out downward and then broke out upward, busting the original breakout direction. Busted patterns tend to do well, perhaps because few traders look for them. Pattern B is a pipe bottom. C is a head-and-shoulders top, and D is a descending triangle or a roof. The Qtr label in February marks the date of an earnings announcement. Since price moved up in a tall candle a day later, it's clear traders liked the results.

Here is the complete list of stocks in the industry, in case you would like to take a closer look. The associated chart pattern is the most recent one.

Anadarko Petroleum Corp. (APC). Horn bottom starting 01/22/2008 and ending 02/04/2008.
Apache Corp. (APA). Pipe bottom starting 03/17/2008 and ending 03/24/2008.
Atwood Oceanics Inc. (ATW). Triangle, symmetrical starting 10/26/2006 and ending 11/28/2006.
CNX Gas Corp (CXG). Pipe top starting 02/25/2008 and ending 03/03/2008.
Continental Resources Inc. (CLR). Pipe bottom starting 03/17/2008 and ending 03/24/2008.
Forest Oil Corp (FST). Rising wedge starting 09/04/2007 and ending 10/08/2007.
Helmerich and Payne Inc. (HP). Pipe bottom starting 01/03/2007 and ending 01/08/2007.
Noble Energy Inc. (NBL). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
Occidental Petroleum Corp (OXY). Triangle, symmetrical starting 11/07/2007 and ending 12/12/2007.
Price International Inc. (PDE). Pipe bottom starting 03/17/2008 and ending 03/24/2008.
XTO Energy Inc. (XTO). Pipe top starting 02/25/2008 and ending 03/03/2008.

-- Thomas Bulkowski

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Monday, 4/7/08: Steam in the Semiconductors

IGW on the daily chart

I will be making changes to the format of this page, prompted to do so by a suggestion last week. It's difficult to read white text on blue and you have to go to the home page to get to the good stuff. Hopefully, I will have the changes done soon but it is slow going. I do this myself and it is like learning a new language by using only a dictionary.

Once written off as dead, in the last week, my semiconductor stock has inched higher like so many of the plants in my garden. I show a chart of the Goldman Sachs semiconductor ETF (IGW). It shows an Adam & Adam double bottom on the daily scale. It is not a true double bottom until price closes above the red line, and there is no guarantee that will happen soon. Above that waits overhead resistance shown by the two green lines. The area between the two lines represents a zone of resistance, and not just a single point. My guess is that should the ETF rise into the zone, it will stall near 58.50, site of twin bottoms in December and a gap before that in November. Just rising up to confirmation would be good news for the industry...

-- Thomas Bulkowski

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Thursday, 4/3/08: Dow Utility Stocks

^DJU on the daily chart

Shown is the Dow utility average on the daily scale. Price has formed a right-angled and descending broadening formation, highlighted by the red lines. Price has closed above the top of this pattern. Price has also closed above the green down-sloping trendline drawn along prior peaks. Both suggest that the utility stocks will continue to do well. However, since the average has been moving higher for three days now, it will probably require a rest. My guess is it will happen today. That might mean it is a buying opportunity but maybe you can look for a retrace in the average to about midway down the tall white candle of two days ago. That would be about a 50% Fibonacci retrace of the up move. Since we are dealing with an average here and not a utility stock directly, a retrace is harder to predict.

In the 38 utility stocks that I follow, 15 of them show some type of bullish reversal pattern (mostly double bottoms and head-and-shoulders). This reminds me a lot of the housing industry. In January, the housing industry ranked dead last for relative strength. Now, it is number 7 out of 48 (1 is best). The utilities rank 13 (central US), 24 (Eastern), and 25 (Western). That's not bad but if you read some of the analyst reports, they say the industry will worsen. I disagree. As the economy improves, electricity usage will rise and earnings will rebound. Since the market looks six months ahead, now is the time to buy while they are cheap. Or if not buy, then at least window shop, maybe kick some tires.

Here is a list of utility stocks and the most recent pattern found. FULL DISCLOSURE: I own CH Energy -- CHG and I am NOT recommending it as a buy, but you can see the Eve & Eve double bottom) .

-- Thomas Bulkowski

Utility stocks in the central US

Ameren (AEE). Double Bottom, Adam and Eve starting 01/22/2008 and ending 03/17/2008.
American Electric Power AEP (AEP). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
Centerpoint Energy (CNP). Pipe top starting 08/20/2007 and ending 08/27/2007.
Cleco Corp (CNL). Head-and-shoulders bottom starting 03/10/2008 and ending 03/31/2008.
DPL Inc. (DPL). Head-and-shoulders top starting 11/29/2007 and ending 12/21/2007.
DTE Energy Company (DTE). Triangle, descending starting 01/25/2008 and ending 02/26/2008.
Empire District (EDE). Triangle, descending starting 10/22/2007 and ending 01/07/2008.
Exelon Corp. (EXC). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
FirstEnergy Corp. (FE). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
Great Plains Energy (GXP). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
MGE Energy Inc (MGEE). Triangle, descending starting 01/22/2008 and ending 02/19/2008.
Nisource Inc. (NI). Triple bottom starting 01/22/2008 and ending 03/31/2008.
OGE Energy Corp (OGE). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
Williams Companies Inc. (WMB). Pipe bottom starting 06/04/2007 and ending 06/11/2007.
DJ US Utilities sector index fund (IDU). Pipe bottom starting 01/22/2008 and ending 01/28/2008.

Utility stocks in the eastern US

CH Energy Group (CHG). Double Bottom, Eve and Eve starting 01/23/2008 and ending 03/07/2008.
AES Corp (AES). Rectangle top starting 11/08/2007 and ending 01/14/2008.
Central Vermont Public Service Corp. (CV). Triangle, symmetrical starting 12/04/2007 and ending 02/07/2008.
Con Edison, Inc (ED). Falling wedge starting 01/22/2008 and ending 02/19/2008.
Dominion Resources Inc. (D). Double Bottom, Adam and Adam starting 03/10/2008 and ending 03/17/2008.
Duke Energy Corp (DUK). Broadening wedge, descending starting 02/12/2008 and ending 03/19/2008.
Energy East Corp (EAS). Double Bottom, Adam and Adam starting 03/13/2008 and ending 03/28/2008.
FPL Group Inc. (FPL). Head-and-shoulders bottom starting 03/03/2008 and ending 03/20/2008.
NStar (NST). Pipe bottom starting 01/22/2008 and ending 01/28/2008.
Progress Energy (PGN). Pipe bottom starting 10/18/2007 and ending 10/22/2007.
Public Service Enterprise Group PEG (PEG). Triangle, symmetrical starting 02/04/2008 and ending 02/27/2008.
Southern Company (SO). Double Bottom, Eve and Adam starting 10/22/2007 and ending 11/07/2007.
Teco Energy Inc (TE). Broadening bottom starting 02/19/2008 and ending 03/19/2008.
UIL Holdings Corp (UIL). Double Bottom, Adam and Eve starting 01/22/2008 and ending 03/13/2008.

Utility stocks in the western US

Black Hills Corp (BKH). Broadening top, right-angled and ascending starting 09/06/2007 and ending 11/06/2007.
Edison International (EIX). Triangle, symmetrical starting 01/24/2008 and ending 02/19/2008.
Hawaiian Electric Industries, Inc. (HE). Head-and-shoulders top starting 11/23/2007 and ending 12/21/2007.
IDACORP Inc (IDA). Head-and-shoulders bottom starting 01/23/2008 and ending 03/28/2008.
Integrys Energy Group, Inc (TEG). Double Bottom, Adam and Adam starting 03/07/2008 and ending 03/17/2008.
PG and E (PCG). Triangle, descending starting 03/04/2008 and ending 04/01/2008.
Pinnacle West Capital Corp (PNW). Triple bottom starting 03/07/2008 and ending 03/31/2008.
Portland General Electric Co. (POR). Head-and-shoulders bottom starting 08/06/2007 and ending 09/05/2007.
Puget Energy, Inc. (PSD). Head-and-shoulders bottom starting 08/06/2007 and ending 08/28/2007.
Xcel Energy, Inc (XEL). Head-and-shoulders complex bottom starting 03/03/2008 and ending 03/20/2008.
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Wednesday, 4/2/08: Dow Transports, T & A: Truckers and Airlines

^DJT on the daily chart

Although we have seen this picture before, the Dow Transports show a complex head-and-shoulders bottom that confirms. Price broke out upward on March 24 but quickly peaked and then retraced. I show the retrace as a throwback to the blue neckline. Yesterday (Tuesday), the markets shot up and the transports went along for the ride.

I only look at 10 stocks in the transports, split between airlines and trucking companies. Many of the airline stocks have bounced off the runway twice and may be going around for another try (meaning they formed unconfirmed double bottoms and are now moving up). The truckers are doing better with an industry rank of 7 out of 48, where 1 is best. Two of three that I follow in the Dow are (Con-way (CNW) and JB Hunt (JBHT)). The companies are mid range or breaking out to new highs but the third YRC (YRCW) looks like an airline stock -- an unconfirmed double bottom with price moving up.

Of the airline stocks, FedEx (FDX) shows a confirmed Eve & Eve double bottom, albeit somewhat ugly. JetBlue (JBLU) shows an interesting double bottom, unconfirmed, but the recent tight knot of congestion formed during the last week may act as support once it breaks out of it. Price would probably stall a point higher (about 6.60 to 7), just underneath confirmation when it bumps up against overhead resistance. Southwest (LUV) may hit turbulence when it climbs up enough to reach a down-sloping trendline drawn along the prior peaks. Price will likely stall and probably reverse at about 13. United Parcel Service (UPS) shows a loose price pattern and it is not to my liking. However, it has pushed above the congestion region and above a down-sloping trendline, so it might be good for a climb to the old altitude of 76 to 79, not far above Tuesday's close of 74.73.

-- Thomas Bulkowski

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Tuesday, 4/1/08: Dow Industrials

^DJI on the weekly chart

I show the Dow Jones industrials on the weekly scale. Price at B has touched a long term support line, shown in red, connecting the valleys since October 2004. It is a major support line and if the Dow were to close below the line, then expect the Dow to tumble to 11,000, or perhaps lower. More about that in a bit.

Another support line appears in green, drawn horizontally along the peaks and valleys, also from October 2004 onward. It is drawn at about 10,700 whereas the 11,000 mark is represented by the peak (high price) at C. This zone (10,700 to 11,000) I expect will support price should the dow breakout downward from its current trading range.

A second green line appears at A, and it highlights the top of the current trading range. The vertical blue mirror line is drawn ending yesterday. Everything to the right of it is a guess.

Which way will price move? If the Dow closes above the green line at A, I would expect price to continue moving higher. My recent buying, although cautious, assumes that this will be the case. If price pierces the support line at B, then I would expect the drop to be something like that shown by the price movement to the right of the mirror line. In other words, it might mirror the quick rise we saw from July 2006 to February 2007.

Mirrors are useful for projecting where price may move. I show a second mirror around the head of a complex head-and-shoulders top. The M2 line is the head, LS, Ls2, RS and Rs2 are the left and right shoulders. Notice that they are near the same price level and the near same distance from the head. In some cases they will also appear similar. That's the beauty of mirrors.

Which way will the Dow move? If it weren't April Fool's Day, I would tell you.

-- Thomas Bulkowski

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