Tuesday, August 05, 2008

Cup & Handle - China Medical Technologies, Inc. (ADR) (Public, NASDAQ:CMED)

CMED was an earnings gap which formed a C&H with NRIB (NR7) - price/volume contraction before expansion as discussed in yesterday's post. The Cup & Handle pattern is easier to see on the 5 min. time frame. Price rallied nicely out of the base despite the lame volume. That was a good clue that something was not quite right, but I got caught off guard anyway. After tagging $48.50, price retraced sharply and I couldn't take my partial. I moved my stop just under R1 and took a partial when price finally moved back towards $48.50. After all that narrow sideways trade, I was expecting 3 WRBs when price closed above $48.50 resistance, but CMED retraced again. Finally, after the FED, on the third wave, volume finally kicked in.

ACI was a B&B short off of a narrow 3 PP base. It got off to a very slow start. The only thing that kept me in the trade was the series of lower lows and lower highs on the lower time frame. I took a partial just ahead of the FED. My target was $45.00 which is a solid support level on the daily time frame above. We didn't quite get close enough to the target for me to plan an exit. At first I thought, bear flag, but then it formed a 3 PP base at $46.00, so I covered and went long into the close.

After three waves down, I expect ACI will find support at this level, and retrace. $60.00 looks like a good pivot target, but even a 32% retracement from the June highs would be good.

Shorting ABX was my FED trade. My logic was that rate cuts are bearish for the USD, so no rate cut is good for USD, therefore bad for Gold.


PDT said...

I have a question on your 3 PP base.

Does it tag the line 3 times then on the 4th break, or is it 2 times then on the 3rd it breaks?

Jamie said...


Ideally, three pivots followed by some NRIBs on 1 minute chart, then BO. In real time, the pivots are not always exact ie. some bases are cleaner than others, and the cleaner ones generally perform better. I prefer when price pauses on the PP so that I don't go in on a WRB. Also more confident when the pivots line up with a whole $ level. I also like when volume thins out around the third pivot - contraction before the expansion.