Bulkowski's Eagle Materials (1) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): symmetrical triangle, falling wedge, broadening formation right-angled and descending, Eve & Adam double bottom, Eve & Adam double top, ascending scallop, inverted and ascending scallop.

Please forgive how my computer drew the blue lines, but you get the picture. Price has broken out downward from the broadening formation in March 2005. It has also confirmed the Eve & Adam double top, suggesting a downward price trend.

Answer 1 (buy?): Since the breakout is downward, short the stock but recognize that when price reaches the blue line, it could reverse there. That doesn't leave much of a profit opportunity.

Answer 2 (target?): I'd use underlying support as the target -- the blue line.

Answer 3 (stop?): The top of the broadening pattern is 9.8% away. That's just inside the 10% or less that I like to see for a stop, so that's where I'd place it. It still seems unusually far away, though.