Bulkowski's Beazer (BZH) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): Two double bottoms, double top, and a rectangle top.

The twin peaks of the small double top aren't that pronounced, but they are present. Price has confirmed the double top as a valid chart pattern when it closed below the valley between the two peaks.

I'll answer the questions on the next slide.

This is the monthly chart of the stock with a down-sloping trendline drawn along the peaks. In my trading notebook, I wrote this.

"No chart pattern here, but more of putting cash to work than anything else. I don't think this has much promise, maybe a rise to 16 from current 13 or even 19. Those two numbers are from trendlines intersecting where I expect the stock to reach, using the monthly scale and connecting peaks since mid 2010 and late 2017. Notice that the trend in both is downward.

The top trendline is clear but the lower one, the one which cuts through prices, is just a guess. I didn't say where that trendline is supposed to be drawn, but that there were two trendlines.

Answers 1, 2 (buy?, target?): I decided to buy the stock but was a day early as the chart shows. Here's what I wrote in my trading notebook.

"Suppose this has to turn sometime. But I'm underweighted in the stock. Plus, this hardly dropped today (15 cents or 1.1%) when the Dow was off 943 points or 3.4%. I LIKE that countertrend action. Plus, it's sitting on support here, just below 13, a small HCR [horizontal consolidation region]. I'm thinking it's going to move up, but earnings are due any day now, so that's a risk."

Answers 3 (stop?): My notebook made no mention of a stop loss order so I assume I didn't use one. For a buy-and-hold trade, I don't use one. For a swing trade or short-duration trade, I will. My notes indicate this was a buy and hold.

Question: If you owned the stock, what would you do with it? Sell, hold, short?

I sold at market open less than half of my position and continue to hold the rest as I write this (September 2021).

From my notebook:

"Sell reason: Big gains the last 2 days pushed up the stock 23% (close to close). Based on the monthly chart, there is down-sloping trendline resistance from 2010 onward. Support and resistance chart shows overhead resistance is thick above 20 to 35. There's a thick red line at 20, too [not shown]. Plus, there are cycles. The stock peaked in 2010, 2014, 2017 and today. Looks like this might be another peak. Earnings are due to come out in 6 days. Although December home construction is up, which has powered the stock higher, I am sticking with my plan to shed some of my shares and take the profit. I still have the other shares for future gains, which I expect are still to come. This also neared my 20 target, so sell reason is overhead resistance and hit target. Overhead resistance hasn't shown up yet, but I think it's there above 20 and I sold a buck below my 20 target. Oh well."

The buy-and-hold turned into a swing trade. I bought at 13.05 and sold at 19.10 for a gain of 46% in less than three months.

After I sold, the stock peaked the next day and then dropped until bottoming at A. Since then, it's recovered as the chart shows.