Bulkowski's Abgenix Trading Quiz

Here's my notebook entry for the trade. It provides the answers.

"Date: 7/27/05. Filled at: 10.31. Stop: 9.27 or 10%. Upside target for the rounding bottom: 11.24 (7/21) - 6.45 (4/27) for a height of 4.79 * 57% (percentage meeting price target, pattern height added to pattern top) = 13.97.

Buy reason: Rounding turn. There is much support at 10.50 which the stock is struggling to breach. I think the stock will tumble back to support at 10.30, so I placed an order to buy at 10.31. Right now, the stock is rounding over, heading back down. It's at 10.43. News is that earnings were in-line, but the market didn't like it. The stock gapped open and I saw a small ascending triangle form but didn't act on it at 10.20 to 10.30. I missed my chance. I still believe in the stock. Once it pushes through this knot of resistance at 10-11, it could pop."

This is the chart on 8/1/2005. The stock has closed above the pennant's trendline boundary. The three Vs are the 3 rising valleys chart pattern. E and E is an unconfirmed Eve & Eve double bottom. TT is a triple top or maybe a head-and-shoulders. The E in April 2005 is part of an Eve & Adam double bottom, but the price difference between the two bottoms seems large.

Question: If you didn't buy before, do you now?

My answer is on the next page.

Here's my notebook entry.

"Date: 8/1/05. Filled at: Canceled before execution. Stop: 9.91. Upside target: 15.

Future S&P direction (guess): Down

Buy reason: Rounding bottom. I like the way this stock is behaving. It shows a small knot of congestion (pennant) just after the breakout from a rounding bottom. I want to buy more if it continues to rise."

I don't remember why I canceled the trade... Here's additional notebook entries.

"9/22/05 I watched the stock throughout the day. It was up in the morning so I thought it would hang in there, but no! Tomorrow, I'll try to time it on the up swing.

"Date: 9/23/05. Filled at: 11.41.

Sell reason: The stock has started moving down and I waited too long to sell. Getting out was full of problems as I forgot to cancel my stop order before trying to sell. I didn't know that the order wouldn't go through. When the stock rebounded to a higher price, I put in a limit order to sell but it took too long and didn't take. Price tumbled before I changed it to a market order and dumped it. Next time, just dump the thing. Selling now allows me to exit with a tidy profit and buy back in if I see the stock rebounding."

The stock never climbed to the 13.97 target. The stock did rebound but made a lower high, a sign of trouble. When the general market tumbled in the last few days, the stock followed. I made 10.5% in 58 days, or 66% annualized. Now, wouldn't that be nice?