Bulkowski's Teradyne Trading Quiz

Price has broken out upward from the symmetrical triangle and then thrown back at point A. Since then, price has moved up.

From my notebook: "5/13/03. I bought at market. This is a symmetrical triangle after throwback play...a bit late on entry. I don't have good vibes from this. I think the semiconductor industry sucks and this is a supplier to it. Still, it's breaking out to new highs and the overall market is strong. I see overhead resistance at 15, 17, and 20. Support at triangle apex is at 12. Stop at 11.25, below a recent low. I think it will push through 15, pause at 17, waffling, then make it to 20. If it hits 18, that would be a double in just a few months. Not likely. Commodity channel index is at high end, relative strength index is mid range, and moving average convergence/divergence is green and growing."

The chart shows the resistance I saw. I circled areas where I thought resistance might pose a challenge (red lines) to the upward price move. The green line is what I saw as support. Point B is the minor low where I placed the stop.

The stock hit overhead resistance shown as the blue line and has made lower lows for 2 days.

Question: If you owned the stock, what would you do?

As I look back at my notebook, I'm surprised I called the move so well. I wrote: "I think it will push through 15, pause at 17, waffling, then make it to 20." The bottom blue line is at 17, the top at 20. You can see that price pushed through 15 and started waffling at 17, nearly touching 20 in early July.

Here's my notebook entry for the sale.

"7/10/03. I sold my position in the stock, at market open, because I think the market is turning. I've made 20% in 2 months, and the commodity channel index is diverging, suggesting a stock drop. It's been rounding over for the past few days and the semiconductor equipment manufacturing is the hot sector now. Time to sell. It didn't hit my 20 target, but pushed through resistance at 15 and 17 nicely."