Bulkowski's KB Homes (KBH) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): Big W, broadening formation right-angled and ascending, 2 double bottoms, simple ABC correction, channel.

The bottom of the Big W shows two double bottoms forming the reversal pattern at the base. The December channel is also a small ABC correction, so you can see how well that one did.

The simple ABC correction has broken out upward when price closed above the pattern's high (although a trendline break is also a good signal).

Answer 1 (buy?): Buy because the breakout is upward, confirming the pattern as valid.

Answer 2 (target?): How about 68.18? That's the height of the channel projected upward from the trendline breakout price.

If I use the big Ws right handle low (A) as the start of a measured move up chart pattern (ABC, it makes the channel retrace look proportional), then I get a measure rule target of 80. That's B - A + C or 63 - 37 + 54= 80 (eyeballing it).

Answer 3 (stop?): Place a stop loss below the minor low before the breakout (D). That's on May 13 at low of 55.40, so I'd place it at 55.33. The stock closed at 64.70 so that would give a potential loss of 14%. That's much too far. Volatility is $2.65, so place a stop no closer than the day's low (63.69) minus 2.65 or 61.04. I'd place it at 60.93. That's a 6% give back, which is better than 14%.

Price reached a high of 85.45 before giving easing down.