Bulkowski's Lam Research Trading Quiz

Price has broken out upward from the descending triangle and completed a throwback.

Question 1 (buy?): Yes. Here's my notebook. "Date: 9/21/04, filled at: 23.10. Stop: 19.64, just below triple bottom low, or 15% down. Ouch! I am willing to sacrifice this drawdown to get to the old high of 33. Upside target: 33, the January 2004 high. Future S&P direction (guess): Up. Nasdaq is moving above its 200 day moving average in a tight flag. I expect price to reach the measure rule target for the flag.

This chart shows the 200-day exponential moving average in the Nasdaq composite and the flag I mentioned above.

Buy reason: On the weekly chart (shown), this is at the bottom of a rounding turn. Fundamentals are good when compared to others in the semiconductor capital equipment business. A triple bottom (shown) and pipe bottom (P) round out the bottom of the turn. This may take 9 months to return to the old high, but it looks very promising. Expect price to blip up then return to the rounding bottom base as happens in some rounding turns. When it gets over 30, be prepared to sell. I feel confident about this trade.

Here's a picture of the rounding turn on the weekly scale ("Buy reason: On the weekly chart, this is at the bottom of a rounding turn.").

More notebook: "11/17/04. Stop raised to 24.83. 12/6/04 Stop raised to 25.47. 12/16/04 Stop raised to 27.13"

The horizontal red lines show the date and price where they were placed. The round circle is the last stop placed on the last bar on the chart, at just over 27.

As the above notebook entry says, price dropped and hit my stop, taking me out before I thought the time was right. Nevertheless, I made 17%. Price eventually climbed to 33, hitting it in 10/13/2005, nine months after I sold and after reaching a low of 24.24.