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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 Pride Trade

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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.

The Pride Trade Setup

In mid January, I was hunting around for stocks to buy and found one in Pride (PDE), shown in the chart on the daily scale.

I looked at insider selling and wrote, "1/16/11 Insider selling at $20-30, but it looks to be a monthly sell program of small shares (500 by one insider). Many other insiders have sold since October, also monthly. Company is a deep water driller with long-term contracts in place for most of their rigs. Earnings consensus leans toward selling. Earnings due Feb 14."

Picture of Pride (PDE) on the daily scale.

I felt that the upside was 45, which became my long-term target. I scored the triangle and found it had a +1 score with a target of 42.84. That means the probability of the stock reaching 42.84 was good.

I checked the noise and found that it was only 36% over the prior month and 47% over 3 and 6 months. That suggested the stock was trending. In this case, however, the trends were short lived -- up and down swings of straight-line runs as the chart shows.

The price trend of the stock and market were up over 1, 2 and 6 months. The industry was up in 12 of 14 stocks over 1 month, but over 2 and 6 months, all 14 stocks were rising. That suggested a coming turn in the industry (or at least isolated weakness). I chose to focus on the positive, that the industry was moving up.

The average volume was rising over the prior 3 weeks, suggesting a lower failure rate. The stock was also outperforming the S&P 500 and there was a 35% chance that the 1-day downward trend would continue. Most of this information is found by my computer, which also told me that the best day to buy this stock was Thursday.

This was supposed to be a buy-and-hold investment based on a busted triple top (numbered in the chart), a congestion breakout (circled), and an ascending triangle. I show the triangle in red.

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The Pride Buy

Picture of a flower from my garden.

Here's what I wrote in my notebook as my buy reason: "I like the oil strength, with gulf drilling resuming. I think this will take a hit this quarter, but will recover by next quarter. This is due to the BP blowout and deep water drilling halt. My question is this: why hasn't this stock done better like HERO has?" [FULL DISCLOSURE: I also own HERO as of May 2, 2011, the time of this post]. "This is an ascending triangle play. It shows congestion here, but I expect that will lead to a good move higher. It's a buying opportunity.

I bought on January 18 and received a fill at 33.74 with a stop at 30.93, below the volatility stop recommendation of 31.71 and below a recent minor low.

Two days after I bought, the stock started sinking. That's one reason why I dislike ascending triangles, but since this was buy and hold with a stop in place, I put it out of my mind.

The Pride Sale

On approximately, February 8, I placed a limit order to sell if the stock reached 41. Why 41? Because the gap up was created by a takeover offer by Ensco valued at 41.60. I was willing to give up the 60 cents to avoid the risk of a deal collapsing or being locked in for 6 months until the thing closed (or however long it takes).

Usually, stocks with takeover offers flat-line like a dead animal, but not this one. With the price of oil rising, the value of the deal also climbed. Hence the stock moved higher and took me out at 41 but continued moving up.

Since I wasn't interested in taking stock in the merged company, I decided to sell and made 21.4% in about 6 weeks.

-- Thomas Bulkowski

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See Also

  • CH Energy (CHG), 35% gain in a dividend paying stock by range trading.
  • Conseco (CNO), flat base on entry, inverted dead-cat bounce on exit, +110% in 6 days.
  • Hecla Mining (HL), head-and-shoulders bottom on entry, trend change on exit, +15% in 9 days.
  • Georgia Gulf (GGC), Adam & Adam double bottom on entry, +32% in 3 days.
  • Monsanto (MON), ugly double bottom on entry, hit stop on exit, +15%, +19% in 63-73 days.
  • YRC Worldwide (YRCW), flat base on entry, an inverted dead-cat bounce on exit, +34% in 1 day.

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. Management: The art of getting other people to do all the work.