VMW is a watch list stock and it was on the Briefing.com gapper list this morning. Around midday, I noticed what looked like a NR7 bar developing on the 15 minute timeframe. The pattern looked similar to a cup & handle but it was hard to distinguish, so I drilled down to the 5 minute timeframe for a closer look.
The five minute timeframe was much easier to distinguish the C&H characteristics. This pattern often develops on gapper stocks. It takes a long time to develop because the base or the cup portion is often quite wide as is the case with VMW. It's very easy to write these patterns off because we just get tired of waiting for something to happen and often give up and move on to something else. However, when the handle portion of the C&H pattern develops it becomes crystal clear that this could set off a momo move. The main characteristic of the handle is a shallow base on reduced volume which gives the NR7 effect.
Normally, the pattern can be expected to deliver a 100% Fibonacci extension from the low of the cup to the base. Refer to the AAPL example below for the normal extension. In the case of VMW, which is trading just below its all time high, we don't want to limit the gain to 100% if it succeeds in taking out the daily pivot high - blue sky.
I took a very low risk entry on the break of the handle. When price started to come back in after breaching the daily pivot high, I booked a partial profit. It consolidated briefly and continued higher, so I let the balance ride until it carved out a tweezer top late in the session.
The AAPL pattern looks like a doubled handled C&H pattern. That's why it's important to wait and observe the low volume on the second handle before anticipating an entry.