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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 Georgia Gulf

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

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.

 

Georgia Gulf Backstory

Georgia Gulf trade

Now that the trade is over, I can tell you about it.

Georgia Gulf (GGC) is a company that I traded many times over the years, but forgot about it until discovering it at point A on the accompanying chart. I first marveled at the large drop in the stock (it was at 20 in August 2007) and my next thought was, "You've got to be kidding!"

I knew the company was worth more than $3.12 a share (the low at A). I started to do my research but the next day, the stock took off and closed 25% higher, so I lost interest. I won't chase a stock upward.

Anyway, I dug into the fundamentals and found that the company has a book value of about $11 a share so if it went bankrupt, there might be a few pennies left for guys like me. I considered it a steal because I think it could trade at $20 in 2 to 3 years. So, I watched the stock move up and then drop back down. I didn't pay too much attention to it but wish I had. Another low surfaced but I didn't see it (point B).

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Georgia Gulf Entry

On January 28, the stock closed above a down-sloping trendline so I bought a 1/4 position in the stock the next day, receiving a fill at $5.80, shown as point D. The stock had, by this time, made an Adam & Adam double bottom (points A and B), confirmed when price closed above C. I was hesitant to buy the stock because there seemed to be overhead resistance at 6 (several candles stop at or near that value) and I thought the stock would tumble. It didn't, so I pounced.

I sold the stock at point E, 7.67, for a 3 day gain of 32%. Why did I sell? The market was up strongly today, 207 points on the Dow, and I feel that tomorrow it will retrace some of those gains. More importantly, I know that the company has an earnings announcement coming out soon (February 15), and I didn't want to give back my profits if it comes in worse than expected.

The Georgia Gulf stock on the daily scale

Georgia Gulf Aftermath

The day after I sold, price moved to a new high but closed at the same price as on the day I sold.

Days later, as the chart shows, price continued moving lower, so selling was the right choice. Price bottomed at B before recovering.

In the figure, the bought and sold arrows do not point to the prices at which the transactions occurred, rather to the days when they occurred.

In the 2008 bear market that followed, the stock continued lower, eventually trading below $1 before a reverse 1 for 25 stock split in July 2009.

-- Thomas Bulkowski

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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. Jimmy Hoffa Virus: Your programs can never be found again.