a minimum. For steep,up-sloping necklines, substitute the rise between thehead and right shoulder (that is, the highest price inthe rise) for the neckline breakout price.
Do not wait for confirmation
If you can determine that a head-and-shouldersformation is completing, consider buying the stock.This formation rarely disappoints and the rise is worthbetting on. However, you must be sure that a headand-shoulders bottom is present. Otherwise, wait forprices to rise above the neckline.
Stop Loss
Place a stop-loss order \ below the lower of the twoshoulders. Often, prices drop to the shoulder lowsbefore meeting support. Raise the stop as prices climb.
Watch for throwback
If you miss the upside breakout, wait. Half the time, thestock will throw back to the neckline. Once it does, buythe stock or add to your position.
high. However, a frequency distribution of the time to reach the ultimate high
shows that most formations land in the short-term category (up to 3 months).I therefore classify this formation as having short-term trading implications.Where in the yearly price range does the formation occur? Most breakouts from a head-and-shoulders bottom occur in the center third of the yearlyprice range. The breakout happens near the top of the formation and explainswhy there are not more occurrences in the lowest third of the price range.
When we distribute the percentage gains over the same yearly price range, wefind that formations with breakouts in the top third of the yearly price range
tend to gain the most, 44%. This finding suggests that momentum playersgrab hold of the stock and bid it up.Average breakout volume is 63% above the prior day (163% of the total)but rapidly recedes over the course of a week. I looked at breakout volume as afunction of high volume (125% of the prior day) and low volume (7 5 % of the
prior day). Almost three out of four breakouts occur on high volume. Still, thatleaves 26% of the formations with successful upside breakouts on low volume.Even though a formation may break out on low volume is no reason to suspectthe formation will ultimately fail. As mentioned previously, I looked at the 18
formation failures and 44%, less than half, have failures occurring after a lowvolume breakout.
Alaska Air Croup Inc. (Air Transport, NYSE, ALK)
Trading TacticsTable 18.4 discusses trading tactics for head-and-shoulders bottoms. Use themeasure rule to predict the minimum price move once prices break above theneckline. In Figure 18.7, the head marks the lowest price in the formation.Subtract its price from the value of the neckline at that point. In this example,the head has a daily low price of 13 l/s and the neckline, measured vertically, is
at 17'/2. Add the difference, 43/s, to the price where the stock closes above theneckline. This occurs on March 28.1 use its daily low price of 15l/2 on that dayto get a target price of 197/s. Prices reach the target in mid-July.If you can determine that a head-and-shoulders bottom is forming, then
there is no need to wait for confirmation (that is, for prices to close above theneckline) before placing a trade. With a failure rate of 5%, your guess will getyou in at a lower level and yield higher profits. However, this all hinges on thevalidity of a head-and-shoulders bottom. If you guess wrong, you could see
your profits rapidly turn into a loss. If you are unsure whether the price seriesis indeed a head-and-shoulders bottom, wait for prices to move above theneckline before investing.
Sep94 Oct
Nov
Dec
|an 95
Feb
Mar
Apr
May
|un
Jul
Aug
Sep
Oct
Nov
Figure 18.7 A head-and-shoulders bottom. Compute the measure rule by subtracting the lowest low from the neckline vertically to find the formation height.Add the difference to the point where prices close above the neckline. The result isthe target price to which the stock will climb, at a minimum. A broadening topappears in July.
273
274
Head-and-Shoulders Bottoms
v*
Also, since about half of all bottoms throw back, you can wait for a throwback before placing the trade. Although this will get you in at a higher price,the likelihood of the trade being profitable also rises. If you have already placeda trade, consider adding to your position once a throwback completes andprices move higher.The two shoulders are common support areas. Figure 18.7 shows anexample of this. The lower of the two shoulders, in this case the right shoulder,supports the stock in late October.After placing a trade, consider setting a stop-loss point l/s or so below thelower of the two shoulders. Should prices decline, they often turn back beforedeclining below the shoulder lows. If this is too far away from the purchasepoint, place your stop '/s below at the closest support zone. Raise your stop asprices climb.
Sample TradeSome people might consider Bob unlucky, but he has an adoring wife and twochildren. Employed as a blue collar worker in a nearby auto plant, he is happywhen he is working. Unfortunately, strikes by the union have taken their tollon his savings and he has been looking for ways to supplement his income.Ever since he was a boy, Wall Street has held his fascination. He haswanted to play the market and when he saw the head-and-shoulders bottompictured in Figure 18.7, he decided to deploy some of his savings. He boughtat 16, the day after prices pushed through the neckline.For over a week, he did all right. Prices slowly moved up and reached ahigh of 165/s, then reversed. The stock threw back to the neckline and continued lower. Suddenly, he was losing money. Should he sell and take a loss or
hang on because he knew it was going higher?He decided to tough it out. The stock bottomed at 14'/2 and quicklyrecovered. It reached a higher high, then moved sideways for over a month,drifting slightly lower. Bob was not worried because he was making money. It
was not a lot, but with patience, he knew he would do okay.During the summer, things heated up for the airline and the stock tookoff. Almost on a daily basis, it soared higher, making new highs. A bearishbroadening top appeared but Bob did not know about such things. He feltgiddy in the thin atmosphere in which the stock was flying. The stock enteredthe clouds at 213/s.When the airline stock hit turbulence in mid-September and headed forthe ground, Bob could not believe it. The stock was plummeting and all hecould do was watch his profits spin lower like the stock's altimeter. He talkedit over with his wife and they decided to hold on. "It'll come back to its oldhigh and when it does, I'll sell it," he grumbled.
The stock continued down. Soon, his pHe maintained his firm stance that he wouback to the old level.During October, things changed. Theinto the ground, at 135/8, and not only leveIn a month he was at break-even.At the start of the new year, a descend
lower as it widened but turned out to be a
unremarkable volume, the stock turned theprices reach a higher altitude.As the stock closed in on his target oplaced an order to sell at that price. In late Fline run. It soared through 2 !3/8, hitting hisover a month it reached 30.Bob no longer invests in stocks.
Tour
19Head-and-ShouldersBottoms, Complex
277
chance that you are also looking at a complex one. If you look to the left andright of the two shoulders, you might see additional shoulders. Multiple shoulders are one indication of a complex formation. But before I delve too far intopattern recognition, let me briefly review the important snapshot statistics.The failure rate at 6% is outstanding. Only 15 formations out of almost240 fail to perform as expected. The average rise is a reassuring 37%, and 82%of the formations experiencing an upside breakout meet or exceed their pricetargets. These figures are all excellent and they imply that this formation isworth trading.Two interesting findings relate to the formation appearance. When theneckline slopes downward, the stock performs better, with gains averaging 39%versus 34% (for those formations with up-sloping necklines). Formations withhigh volume breakouts also perform better, with gains averaging 39% versus32% for low volume breakouts. We explore these results in the Statistics section.
TourThere are two types of complex head-and-shoulders bottoms: those with multiple shoulders and those with multiple heads. Consider the chart in Figure19.1, a complex head-and-shoulders bottom. The chart pattern has two leftshoulders, a single head, and two right shoulders. If you were scanning your
RESULTS SNAPSHOT
Appearance
An inverted head-and-shoulders formation withmultiple heads, shoulders, or both
Reversal or consolidation
Long-term (over 6 months) bullish reversal
Failure rate
6%
Average rise
37%, with most likely rise between 20% and 30%
Volume trend
Downward
Throwbacks
47%
Percentage meetingpredicted price target
82%
Surprising findings
Formations with down-sloping necklines performbetter. High volume breakouts propel stocks toperform better.
See also
Cup with Handle; Double Bottoms; Head-andShoulders Bottoms; Horn Bottom; Rounding Bottom
I find that a complex head-and-shoulders bottom is more difficult to recognizethan a normal head-and-shoulders bottom but not alarmingly so. After all, ifyou can locate a normal head-and-shoulders bottom, then there is a decent
276
Figure 19.1 A dual shoulder complex head-and-shoulders bottom. Notice thehorizontal neckline and throwback to it. The formation is part of a rounding bottom chart pattern.
278
Head-and-Shoulders Bottoms, Complex
\J
v
charts for normal head-and-shoulders bottoms, this one would probably popup. The left and right shoulders are well defined and the head is below them.As you widen your view, you see an additional pair of shoulders; the left shoulder is about the same distance from the head as the right one. The two outermost shoulders are near the same price level too.Looking at all the shoulders and the head together, the chart is a goodexample of a complex head-and-shoulders bottom. However, the volume pattern is unusual as it is heavier on die right than on the left. Most of the time,the left shoulders show higher volume than the right pair.If you ignore the various labels, you can see a rounding bottom. Althoughthe volume pattern is not a characteristic bowl-shaped pattern, the gentle turnof prices (if you connect the minor lows) supports a bottom formation. However you choose to classify this pattern, the bullish reversal is clear.Shown in Figure 19.1 is a throwback to the neckline, a common occurrence for the head-and-shoulders family, especially the complex variety.Although it takes a week or two before prices really begin moving up, the stockclimbs to a high of 325/s before retracing its gains.Compare Figure 19.1 with Figure 19.2, a complex bottom with twoheads. Overall, the formation is quite symmetrical. There are two shouldersand two heads. A neckline connects the highs in the formation and projects forward in time until prices close above it. The penetration of the neckline is thebreakout point.
Identification Guidelines
279
In Figure 19.2, the breakout in mid-November quickly throws back to theneckline and moves lower for a week or two. The stock rises but throws backagain before finally breaking away and heading higher. By late March the stockreaches a high of 165/g, well above the head low of 93/i6.Volume on the left side of the formation is heavier than on the right. Inthis regard, the formation is more typical than that shown in Figure 19.1.
Identification GuidelinesAre there certain characteristics that make head-and-shoulders bottoms easy toidentify? Yes, and they are outlined in Table 19.1. As discussed before, thereare two general types of complex head-and-shoulder bottoms: those with multiple shoulders and those with multiple heads (rarely do you have both). Figure19.3 shows a complex bottom with multiple shoulders. The head is distinctlybelow the shoulders, far enough below to distinguish the chart pattern from atriple bottom. In this case, there is a normal head-and-shoulders bottomflanked by an additional pair of shoulders. The overall formation appears symmetrical. The two left shoulders match the two on the right in distance. Figure 19.3 shows a far right shoulder that is higher than its corresponding left
Table 19.1
Identification Characteristics of Complex Head-and-Shoulders BottomsCharming Shoppes (Retail (Special Lines), NASDAQ, CHRS)
Left Shoulder
Jul 91
Aug
Head
Sep
Head
Oct
Characteristic
Discussion
Shape
A head-and-shoulders bottom with multiple shoulders,multiple heads, or (rarely) both. The head is lower thanthe shoulders but generally not by very much.
Symmetry
The tendency for the shoulders to mirror themselvesabout the head is strong. The price level of theshoulders and time distance from the shoulder to headis about the same on either side of the head. Theshoulders also appear to be the same shape: narrow orwide shoulders on the left mirror the right.
Volume
Usually higher on the left side than the correspondingshoulders on the right. Overall, the volume trendrecedes.
Near horizontal neckline
Connects the highest rise on the left and right of theformation center. Most formations have near horizontalnecklines.
Upside breakout
A breakout occurs when prices close above the neckline.For those cases with a steep, up-sloping neckline, usethe highest price between the head and rightmostshoulder as the breakout price.
Right Shoulder
Nov
Dec
|an 92
Feb
Mar
Apr
Figure 19.2 A dual head reversal. Volume on the left side of the formation ishigher than on the right.
280
Head-and-Shoulders Bottoms, Complex
Most of the time you will find complethe end of a downtrend. Figure 19.1 is an estatistics later, the study reveals that 75% ofthe prevailing trend and most of the headsoccur near the yearly low.
Focus on Failures
Figure 19.3
A complex head-and-shoulders consolidation. The trend resumes
moving up once the formation completes.
one. However, the basic symmetrical pattern is typical for nearly all complexhead-and-shoulders bottoms.
Figure 19.3 also shows the usual volume pattern: The two left shouldersshow higher volume than the two right ones. Overall, die volume trend is areceding one.The neckline connects the highest peak on the left with the highest peakon the right. Most of the time the line is nearly horizontal. Although this issubjective, a scan of all the formations indicates that 74% obey this guideline.
Many of the formations shown in this chapter have near horizontal necklines.For those with steep necklines (that slope upward), consider using thehighest high in the formation as the breakout price. Using a steep-slopingneckline to gauge the breakout point is risky. Prices may never close above the
neckline.Once prices close above the neckline, a breakout occurs. Quite often,prices throw back to the neckline and perhaps move lower before ultimatelycontinuing higher. Figure 19.2 shows an example of this behavior during lateDecember when prices plunged from a high of 11'/2 to 97/i6, a decline of almost20% in just 2 days! When the decline ended, prices recovered quickly.The formation shown in Figure 19.3 is unusual because it acts as a consolidation of the uptrend. Prices from November through January climb
steadily and then resume moving up after the breakout. The formation is aconsolidation region, where prices move horizontally for a spell.
If making money in the stock market is impfailures. The lessons you learn will serve yoat your failures as a group, you may begin tchart formations.Although there are only 15 failures ofailures act as consolidations of the trend. Osince you can only determine if the formatiafter the breakout. Many of the failures oprices (then prices backtrack to the formation
low is nearby, usually within 10% below themation of the head. There are a few cases wyou should still place a stop-loss order to limFigure 19.4 shows a typical failure of adowntrend. The stock peaks during Septembthat point, it is a slow decline at first but piduring mid-July 1992. By the following Januand forms the dual head.After the head-and-shoulders formatioonly to 57'/8. Prices squeeze above the necklful of days before sliding below the necklinstock reaches 405/s in August.The volume pattern is nearly perfect forThe left shoulder shows tremendous volumheads, and the right shoulder shows even lessmic and may explain why the formation failthat only 3 of the 15 failures (20%) show lowbreakout volume is not a predictor of theAfter all, the statistics show 41 successful loI count any formation with prices thatfailure. About half the failures fall into thseven formations have downside breakoutsunder the 5% rule. The breakout is upward,reversing direction. Once prices decline belohope and mark the formation a failure.
282
VTable 19.2General Statistics for Complex Head-and-Shoulders Bottoms
Head-and-Shoulders Bottoms, ComplexIBM (Computers & Peripherals, NYSE, IBM)
Description
_____
Statistic
Number of formations in 500 stocks from
1991 to 1996
239
Reversal or consolidation
58 consolidations, 181 reversals
Failure rateAverage rise of successful formations
15 or 6%37%20% to 30%
Most likely riseOf those succeeding, number meeting orexceeding price target (measure rule)
Sep92
Oct
Dec
)an93
Figure 19.4 A failure of the complex head-and-shoulders formation to climbmore than 5% after an upside breakout, just 6% of the formations fail in this manner or have downside breakouts.
184 or 82%
Average formation length
3.5 months (105 days)
Number of successful formations showingdownward volume trend
150 or 63%
Average rise of formations with down-slopingnecklines versus up-sloping necklines
39% versus 34%
Average rise of formations with higher rightshoulders (furthest on left versus furthest onright) versus higher left shoulders
38% versus 36%
Near horizontal neckline
176 or 74%
Note: Complex head-and-shoulders bottoms have a 94% success rate and stocks climb37% after an upside breakout.
In sum, I found no reliable clues that indicate an eventual failure of acomplex head-and-shoulders bottom. This should not be alarming since failures represent only 6% of the formations. In essence, you should be able totrade this formation without worrying about a possible failure. Yes, failures willoccur, but with a 94% success rate, why worry?
StatisticsTable 19.2 outlines general statistics for complex head-and-shoulder bottoms.I uncovered 239 formations in 500 stocks over 5 years. This number of formations is on the low side but quite respectable for a somewhat rare formation. Ofthe formations I reviewed, the vast majority (181 or 76%) act as reversals of theprevailing trend, meaning that once the formation breaks out, prices move in
the direction opposite to that before the formation began. In the vast majorityof cases prices head higher.The failure rate is 6%. Nearly all the formations I looked at have upsidebreakouts in which prices rise by more than 5 %.After a breakout, the average rise is 37%. However, the most likely rise islower—20% to 30%. Figure 19.5 shows how I arrived at this range. I created
40
5060Percentage Gain
80
90
>90
Figure 19.5 Frequency distribution of gains for complex head-and-shoulders bottoms. The chart shows the most likely gain is 20% to 30% for the stocks in thedatabase.
283
284
Head-and-Shoulders Bottoms, Complex
"
a frequency distribution of the percentage gains for the stocks in the database.The chart shows two columns with the highest frequency, 20% and 30%, closetogether and well above the surrounding columns. You can also see howthe over 90% column tends to pull up the overall average. The tendency forlarge numbers to skew an average adversely is the reason I use a frequencydistribution.The measure rule predicts the price move after a breakout. The ruleinvolves computing the formation height and adding the value to the breakoutprice (see Trading Tactics). The result is the expected minimum move. Forcomplex head-and-shoulders bottoms, 82% of the formations in the databasemeet or exceed their price targets. I consider anything above 80% to be reliable.The average formation length is about 3l/2 months, which understatesthe actual length because it measures the distance between the two outermostshoulders. The descent to the left shoulder and rise to the breakout point arenot included in the average.I use the slope of the linear regression line on volume data to determinewhether volume is trending up or down. In almost two out of three cases(63%), the volume trends downward. Many times it is easiest to see this trendby viewing the shoulders. The left shoulders will have higher volume than thecorresponding right pair.Some analysts suggest that the neckline slope and shoulder height showthe strength of the formation. I looked into this and found that formations withdown-sloping necklines have a tendency for larger gains than up-sloping ones.The average price rise is 39% for formations with down-sloping necklines and34% for up-sloping ones. The difference is statistically significant, meaningthe results are probably not due to chance.In a similar manner, I looked at the shoulder height. Do formations witha higher right shoulder rise further? Yes. The average rise is 38% versus 36%.By higher right shoulder, I mean a right shoulder that does not decline as far asthe left one. Although the difference is not statistically significant, it does standto reason. When prices do not decline as far as they did in a prior minor low,then the trend is in the process of changing (from down to up). Investors noticethis strength and purchase the stock.Is there a relationship between the gain after a breakout and the height ofthe right shoulder? Not that I could determine. I calculated the gains for thestocks in the database and the right shoulder height, both expressed as a percentage, and graphed the results. I expected to see small right shoulders withoutsized gains. The scatter plot revealed that the relationship is essentially arandom one.Do complex head-and-shoulders bottoms have mostly horizontal necklines? Yes, with 74% falling into that category. This is a subjective measure andI define the term mostly horizontal slope to mean less than 30%. The results support using the characteristic as an identification guideline.
Statistics
285
Table 19.3 shows breakout statistics. Most of the formations (97%) haveupward breakouts with the remainder showing downward ones. Eight formations have upside breakouts that fail to climb by more than 5 %. Together withthe 7 that have downside breakouts, this accounts for the 15 formation failures.In almost half (47%) the formations, prices return to the neckline within30 days (if they take any longer, it is not a throwback but normal price action).These are called throwbacks and it takes only 12 days, on average, for prices toreturn to the neckline.For those formations with successful upside breakouts, it takes 8 monthsto reach the ultimate high. This places the formation in the long-term category. However, I use a frequency distribution of the time to reach the ultimatehigh to get a more realistic distribution. The results do not change. Most of theformations take over 6 months (which is the threshold between intermediateand long term) to reach the ultimate high.Where in the yearly price range do formations occur? Most of the formations (44%) have their breakout in the center third of the price range. Thismakes sense because prices rise from the shoulder lows to the neckline. Thatrise alone often shifts the formation into a higher category. Mapping the percentage gains over the yearly price range shows that there is little difference inperformance: 34% to 38%. The best gains occur when the breakout is withina third of the yearly high. It seems to me that the momentum players grab holdof the stock and bid it up faster when it is near the yearly high.Table 19.3Breakout Statistics for Complex Head-and-Shoulders BottomsDescription
Statistic
Upside breakout
232 or 97%
Downside breakout
7 or 3%
Upside breakout but failure
8 or 3%
Throwbacks
108 or 47%
Average time to throwback completion
12 days
For successful formations, days to ultimatehigh
8 months (241 days)
Percentage of breakouts occurring near12-month low (L), center (C), or high (H)
l_20%, C44%, H37%
Percentage gain for each 12-monthlookback period
L34%, C37%,
Volume for breakout day and next 5 dayscompared with day before breakout
163%, 138%, 115%, 103%, 98%, 99%
Average rise of high volume breakoutsversus low volume breakouts
39% versus 32%
H38%
Note: Nearly all the breakouts are upward and reach the ultimate high in 8 months.
286
Head-and-Shoulders Bottoms, Complex
Another interesting statistic I developed relates to high volume breakouts.Do high volume breakouts propel stocks higher? Yes, with gains averaging39% versus 32% for low volume breakouts. The differences are statisticallysignificant.In the calculation, I used the breakout day plus the next 2 days and averaged the volume of those three together (since a high volume breakout mightbe delayed). Then I compared the volume with the day before the breakout. Iconsidered values over 25% above the benchmark as high volume and 25%below the benchmark as low volume. I computed the percentage gains forthose stocks with high volume breakouts and compared them to those stockswith low volume breakouts to derive the results.
Trading Tactics
287
It took just 2 weeks after the breakout to reach the target, but the stockwas not done climbing. It moved sideways for almost a year before continuinghigher. The stock reached a high of 393/g, nearly triple the head low of 13 '/2 andmore than double the breakout price.The chart in Figure 19.6 shows a complex head-and-shoulders bottomthat forms after nearly a 2-year run-up in prices. The formation marks a rever-
sal of the 6-month retrace. Once a breakout occurs, prices quickly climb to fulfill the measure rule and then stall. Prices then move horizontally for almost 2months before climbing to the next level. There the stock consolidates for 7months before shooting upward in mid-June 1995.Since complex head-and-shoulders bottoms reliably break out upward,there is little need to wait for the actual breakout. Once you determine that acomplex formation is present, buy the stock. Of course, the key is that you
Trading Tactics
must be sure a complex head-and-shoulders formation is present. Many timesthis is made easier when the formation looks like the one in Figure 19.6, where
Trading tactics are outlined in Table 19.4. The measure rule predicts theexpected minimum price move and is best explained by an example. Figure19.6 shows a complex head-and-shoulders bottom on a weekly time scale withthe head reaching a low of 13!/2. Directly above that point, the neckline has avalue of 185/s. The difference, S'/s, is the formation height. Add the differenceto the breakout point (17) to get the minimum price move (22 VB).
a normal head-and-shoulders pattern is flanked by two or more shoulders. Ifyou can identify the inner head-and-shoulders pattern, then you need onlywiden your vision and look for additional shoulders.
With dual heads, the pattern is somewhat different. The dual-head formation usually has head lows that are less than a month apart. Two heads that
Alien Telecom Inc. (Telecom. Equipment, NYSE, ALN)
Table 19.4Trading Tactics for Complex Head-and-Shoulders BottomsTrading Tactic
Explanation
Measure rule
Compute the formation height by subtracting thelowest low reached in the head(s) from theneckline, measured vertically. Add the result to thebreakout price where prices pierce the neckline.The value is the minimum target price.
Do not wait for confirmation
If you can determine that a complex head-andshoulders formation is completing, considerplacing a long trade or cover any shortcommitments.
Stop loss
Stocks sometimes decline to the lowest of the rightshoulders then turn around. Look for support areasnear the shoulders. Place a stop-loss order \ belowthe lowest shoulder or head.
Watch for throwback
Buy or add to the position during a throwback.Wait for prices to finish falling before placing thetrade as prices sometimes throw back and continuemoving down.
Left Shoulder^ . , ' . —- Right Shoulder
9 2 A S O N D 9 3 F M A M | J A S O N D 9 4 F M A M | | A S O N D 9 5 F M A M | | A S OND96FM
Figure 19.6 Complex head-and-shoulders bottom on a weekly time scale. Thefigure shows the target price found using the measure rule. Compute the formation height from the head low to the neckline and add the difference to the breakout price. The right shoulders often offer support during future declines.
288
Head-and-Shoulders Bottoms, Complex
are close together usually distinguishes the formation from a classic doublebottom. Shoulder symmetry and a near horizontal neckline should put die finishing touches on the formation identification.Once you take a position in the stock, set your stop-loss point. Manytimes the various shoulder troughs will act as support levels. If your head-andshoulders formation is near the yearly low, then there is a very good chancethat prices will either turn around at the head or decline slightly below it (by10% or so) before bottoming out. From that point, prices climb higher.If your formation is not within the lowest third of the yearly price range,then sell the stock once prices drop below the head. Prices falling below thehead signal a formation failure and it is best to cut your losses instead of praying that they will turn around. They will not.After an upside breakout, almost half the time (47%), the stock throwsback to the neckline. Consider adding to your position or placing a long tradeonce prices stop declining. You should wait for prices to rebound on a throwback or else you could find yourself in a situation similar to that shown in Figure 19.2. Prices throw back to the neckline then continue down for over aweek. Depending on when you bought the stock, you could have seen a near10% price improvement if you had waited a few days.
Sample TradeWhen the weather is nice, I like to take my bicycle out for a spin and give theautomobile drivers something to aim for. It was on one of my bike trips that Imet Melody. After I told her what I did for a living, she confessed that she wasa nightclub dancer and made oodles in tips. I was unsure whether I bought herstory, but she looked pretty enough (wearing a bike helmet and sun glasses,who can tell?).Anyway, she told me about a trade she had made in the stock pictured inFigure 19.6. The stock intr