Now that the markets are looking up and Tom, Dicken and Harry are all upgrading India. it's fun time again. During the consolidation phase over the past 3+ months, many good stocks formed a nice base. These stocks went down really fast and are now rising up really fast also. What that means is that they are forming tall sides of a W or sides of a cup. Chart base patterns that corrected the least during this decline are the best choices at this point. Look through the slide shows at the main blog page to select such stocks. See two examples below.
The psychology of the W pattern is that investors are buying or selling en masse and representing frantic behavior. The recent upswing has been so swift that many might be feeling left out and want to enter at higher levels. After this period of euphoria comes the real test when the momentum fades. For the cup formation, the bottom should give the apperance of a U rather than a V.
In the cup and handle pattern, a trading range is seen on the right side leading to the formation of the handle. The handle formation should be accompanied with lower volume - shaking out the last weak holders. If the stocks fall with lower volume, that is a good sign. Watch carefully when they rise again and a breakout should happen at higher volume to confirm the pattern.
Happy Hunting! I expect to see a few of these over the next couple of weeks.
