As of 09/26/2022
  Indus: 29,261 -329.60 -1.1%  
  Trans: 11,999 -129.90 -1.1%  
  Utils: 953 -25.04 -2.6%  
  Nasdaq: 10,803 -65.01 -0.6%  
  S&P 500: 3,655 -38.19 -1.0%  
YTD
-19.5%  
-27.2%  
-2.8%  
-30.9%  
-23.3%  
  Targets    Overview: 09/15/2022  
  Up arrow32,000 or 29,200 by 10/15/2022
  Up arrow13,800 or 11,800 by 10/15/2022
  Up arrow1,000 or 950 by 10/15/2022
  Up arrow11,975 or 10,700 by 10/15/2022
  Up arrow3,800 or 3,500 by 10/15/2022
CPI (updated daily): Arrows on 9/13/22
As of 09/26/2022
  Indus: 29,261 -329.60 -1.1%  
  Trans: 11,999 -129.90 -1.1%  
  Utils: 953 -25.04 -2.6%  
  Nasdaq: 10,803 -65.01 -0.6%  
  S&P 500: 3,655 -38.19 -1.0%  
YTD
-19.5%  
-27.2%  
-2.8%  
-30.9%  
-23.3%  
  Targets    Overview: 09/15/2022  
  Up arrow32,000 or 29,200 by 10/15/2022
  Up arrow13,800 or 11,800 by 10/15/2022
  Up arrow1,000 or 950 by 10/15/2022
  Up arrow11,975 or 10,700 by 10/15/2022
  Up arrow3,800 or 3,500 by 10/15/2022
CPI (updated daily): Arrows on 9/13/22

Bulkowski's Eagle Materials (2) Trading Quiz

Released 8/9/2021.

EXP 2: Quiz

Below is a slider quiz to test your trading ability. Captions appear below the pictures for guidance, so be sure to scroll down far enough to read them.

 

1 / 5
chart pattern

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

Answers are on the next slide.
2 / 5
chart pattern

The broadening top has a partial decline in the shape of a flag. A partial decline correctly predicts an upward breakout 72% of the time in a bull market. The bottom of the flag corresponds to a 38% retrace of the move from A to B. The breakout from the flag is upward.


Question 1: Do you buy, short, or avoid trading this stock?
Question 2: If trading this one, what is the target price?
Question 3: If trading this one, what is the stop price?
See the next slide for answers.
3 / 5
chart pattern

Answer 1 (buy?): With price moving up after bouncing off the 38% Fib retrace and breakout of the flag, it's an early buy signal.

Answer 2 (target?): Compute the height of the broadening top (the difference between B and A) to get a height of 8.22. Add this to the top of the pattern, B, to get a target of 53.92, which is conveniently below the 54 round number.

Answer 3 (stop?): Volatility is $1.76 so place a stop no closer than 42.24. That is below the bottom of the flag (C) and it's a good stop location. That would mean a potential loss of 6%.

A buy order was the correct choice because the stock continued to move up. As the blue trendline shows, price lost momentum and broke through the trendline near the top of the chart. A shorter trendline, shown in green, also shows price breaking down.

Question: Do you buy more, sell, or even short the stock?

The next slide shows a new chart and the answer.
4 / 5
chart pattern

This chart is somewhat complicated but focus on the "Large move down" phrase on the left. It shows where we left off from the last chart. Price gapped downward but found support in the low 50's and formed a double bottom/symmetrical triangle. Price broke out upward from the triangle and continued its bull run. If you sold the day after the gap down, you would have been filled between 55.45 and 56.70. The low a few days later was at 52.80, so you would have been selling near the low.

I believe that selling is the proper course of action. After all, price often continues dramatically lower. If it had continued down to 25, how would you feel if you sold at 56?

The next slide shows a trick that's rarely used maybe because it works only 26% of the time, according to a study of trendlines I did.
5 / 5
chart pattern

The measure rule for trendlines: Find the widest distance from the high to the trendline before the breakout but AFTER the most recent trendline touch. I show that as the red line AB. Subtract the height from the breakout price, C, to get a target. In this case, the measure rule worked because price dropped more than the height, so it may serve as the minimum price move to expect.

The End.

See Also

 
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My novels:  Bedroom to Boardroom book Remember Me book Bumper's Story book Head's Law book
My stock market books:  Chart Patterns: After the Buy Getting Started in Chart Patterns 2nd edition book Trading Basics book Fundamental Analysis and Position Trading book Swing and Day Trading book Encyclopedia of chart patterns book Encyclopedia of Chart Patterns 3rd Edition book Trading classic chart patterns book

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