Friday, October 24, 2008

Cup & Handle - Agnico-Eagle Mines Limited (USA) (Public, NYSE:AEM)

I saw quite a few C&H patterns today. The best one was AEM as it set up with a series of NRIBs and NR7 (price/volume contraction ahead of expansion).

ABX's base was not as perfect as AEM and the result was a slow start and a failure to extend fully.


AMGN was not as clean a setup as the gold stocks. It failed on the initial breach of the the base, but held the stop, made a higher low and finally broke out in earnest.

For C&H patterns I extend my Fibonacci lines from the low of the pattern to the base of the handle and look for a textbook measured move of 100%.

14 comments:

Rick said...

POT set up a nice C&H that really exploded up to 70 but I had decided not to trade this morning with the VIX so high. I'm seeing some setups but you have to use your imagination more lately, they aren't as clean as before the ban on short selling financials.

Jamie said...

Rick,

I saw the POT C&H and decided not to trade it either. The main reason I didn't take the POT setup was that it formed a C&H before it had filled the opening gap. The gold stocks had already filled their respective gaps and were safely above them when the C&H patterns were ready to go. In the end it didn't matter, in fact the POT extension was the only one that fully reached 100%.

Rick said...

Makes sense. POT has really been outperforming CF and MOS lately--I guess since they had a good third quarter. I wish I had a program that could alert me to cup and handle patterns--they have been the most reliable technical pattern I trade. I'm going to see if someone has written a Tradestation plug-in for this.

Tyler said...

Jamie,

I am glad to see you traded AEM. That was a great NRIB setup and I was mad when I missed it. The past couple of days have been really confusing for me and I had not straightened things out until this afternoon when I shorted AEM.

Congrats,
Tyler

PS. What type of trading setup do you use? PC with a bunch of screens or laptop, etc.? Just wondering how many stocks you can keep an eye on at one time or if you mainly use alerts.

Susan said...

Jamie,

What is an NR7 bar? Is this bar just of the smallest range from the preceding 6 bars OR every preceding bar have to be smaller from the previous bar, meaning NR7 is smaller than the 6th candle; the 6th candle is smaller in range from the 5th candle and so on.

What is the significance of a NR7 bar?

Susan

Susan said...

Jamie,

If you have time, can you please look at CNX 15 min. chart, for a 3 Pivot point setup at $26. Is this a valid 3 PP setup?

Jamie said...

Tyler,

The markets and many experts are confused so I understand your frustration. I have three computers dedicated to trading. But I'm running several programs and platforms at the same time, because I trade two currencies in separate accounts. At the moment, under these market conditions, I'm not really scanning much. I prefer to trade my watch list, E-mini futures and ETFs.

I like stock pairs and that's how I setup my WL.

AEM , ABX
CNQ, ECA
AMGN, CELG
JOYG, BUCY
POT, AGU
X, AKS,
AAPL, RIMM
DRYS, TBSI
MA, V
FSLR, ENER
ACI, JRCC
FLS, FWLT....

Normally, I love trading earnings gaps, but under current market conditions, not as many opportunities.

I review the WL nightly and set alerts. I sort the WL by % change several times during the day to pick the outliers. But these days, everything seems to move in the same direction.

You have a partner, so one of you could focus on the set WL and the other on scans. Just to give an example, I trade gold almost everyday. Gold and the USD have an inverse relationship and both have had sharp moves in opposite directions. This will change very soon as both are overdue for a retracement. So I expect gold to become a long play in the short-term.

QQQBall said...

i hit ABX... it just exploded from like 19.42 or 19.52... then later it came right back and bounced at 19.52-ish. it did PB more, i think right after NYMEX closed... friday afternoon are always dodgy for gold & PM miners. it got hung up right near the close at like 19.99... i had planned to hold, then decided to sell it & then the market closed with no fill.

Jamie said...

Susan,

NR7 is the narrowest range bar over the last 7 bars. Price contraction in combination with volume contraction has a coiled spring effect so we expect price /volume expansion after a period of contraction. NR7 inside bars are particularly powerful triggers to big moves.

You can read more about it under Key Posts in the side panel. In the post entitled Intro to WSW blog, there are a few items on NR7. Also read the post I did on Low Volatility Breakout.

CNX did form a 3PP base, however on the third pivot it moved several points to reach the PP. Therefore, you want to see some NRBs and and maybe NR7 at the PP before it breaks out. Buyers were exhausted when it reached the PP after moving so far to get to it. That's why it reversed after a 1 pt. gain.

You mentioned that you had traded flag patterns. The reason flag patterns work so well is the consolidation during the flag formation. Flag pole (expansion) - flag (consolidation) - flag pole (expansion). All your trades should be setup on the same principal. So if price makes a big move to get to the base/PP, wait for consolidation. If price consolidates just ahead of the BO, take the trade. If not, wait for a retest of the base. Same principal applies to C&H Cup = expansion and Handle = consolidation.

Hope this is helpful.

Jamie said...

QQQ,

No fill on the close - Hate when that happens. It happened to me with FLS a while back but luckily it rallied on the open. The best thing I can say about ABX is that it carved out a bullish engulfing bar on the session, so if the futures don't go crazy, you should have a winner on Monday.

Tom T. said...

Jamie - I read your 10/23 post about the inverse relationship between USD and gold prices and I saw your posted intent to go long on golds and I wish I had read that sooner because you posted some great trades on 10/24. My question is you predicted the USD to go down short term - when it did not do that on 10/24 did that cause you to question whether it was a good idea to trade gold stocks or were you not watching the USD at that time and instead paid more attention to the stock patterns? You had also thought we might see stocks go higher on 10/24 so when they did not were you concerned that this would also impact negatively on gold prices - what I am getting at is when you build up your thesis for getting into gold and the other indicators are not following your predictions - how does that affect your trading when otherwise the gold stocks are printing patterns that do fit your thesis? I think a less confident trader might second guess whether to get in the trade - wondered what insight you had to make you take the gold trades today. Thanks, Tom.

Jamie said...

Tom,

I was following the $USD through the ETF - UUP which gapped up and faded versus gold stocks which gapped down and faded. The intraday C&H patterns on the 15 minute timeframe for ABX and AEM were picture perfect so I took the trades. UUP didn't complete the gap fill and instead reversed at support and rallied to close higher, hence the failure of ABX to reach the full extension. At the moment of trade entry I thought the gold bottom was on the open. At the end of the day I see that $USD actually gapped lower and printed a bullish engulfing bar. Meanwhile, my Canadian beta proshare (bear) ETF for gold (HGD), has carved out an inverted H&S over the last three sessions. So there are conflicting signals and that may be due to the potential for reversal in the very short-term. Or, it might be due to gold's allure as a flight to safety in uncertain market conditions.

At the moment I'm not making any swing trade commitments based on my assumptions, but I am trading the setups on a day trading basis.

To answer your question, at the time of entry my signals for gold vs. USD were in sync. Notwithstanding, I have noticed that the ETF for the $USD can be misleading in that the chart is not perfectly identical to the $USD. The more confirmation the better, but too much might cause hesitation and a missed trade.

John C. Lee said...

those are some sexy handles

Jamie said...

Thanks John,

I thought so too.