Bulkowski's Albermarle Trading Quiz

The head-and-shoulders appears as LS, head, and RS. The triple bottom as 1, 2, and 3, marking the bottoms. Price has broken out of the triple bottom/ascending broadening pattern.

Here's my notebook entry for the trade.

I scored the triple bottom using my Trading Classic Chart Patterns book methodology. The score was 0 meaning the trade was neutral. Scores above 0 tend to meet or exceed the median rise; those below 0 tend to do poorly. When it's 0, it's a toss up as to whether the trade should be taken or not.

Q3: What is the stop price? Answer: I placed the stop at 28.37, as I show in red on the chart. It's an odd number to be beneath round number support zones (like 28.50) and it's below the nearest minor low. If you look at the chart, you'll see all green on the volume spikes for the last 5 days in a row. How much longer would price continue moving up? My handy dandy home brew program says that there's just a 2% chance of price closing higher for a sixth day. That should have served as a warning, but I missed it.

Q2: What is the target price? Answer: I placed the target at 38.94. That's the triple top high multiplied by the median rise of 26.65% I found for stocks with scores above 0.

Q1: Do you buy, short, or avoid trading this stock? Answer: I bought the stock.

From my notebook. 6/30/04 Stop raised to 29.51.

Price has dropped from the buy date.

Question: Do you make any changes?

Here's my notebook entry for the sale.

The stock hit my stop and sold exactly at the intraday low. As you can see, I sold at the bottom and price took off. This happens sometimes. By raising the stop, I narrowed the potential loss from 9.2% to 5.8%. As you can see, the stock met the predicted price rise of 38.94, suggested by the scoring system. If I sold at the price target the system suggested, I would have made almost 25%. If I sold it at the very peak, I would have made 30%.