$ARL – WATCH: Handle Forming

Base Count

Base Structure

Identifiable base on weekly and dailyYes, currently appears to be in base 2
Prior up-trend of at least 30%Yes, 76.26%
Length of base
    At least 5 weeks flat base
    At least 9 weeks ascending base
    At least 7 weeks for all other bases
30 weeks
Contain elements of strength:
    Daily gap ups on volume
    RS at new high
    tight price ranges
    KO Recoveries
RS at 52-week high, several KO recoveries and gap ups. An earlier gap up at the lows of the base was on big volume. The most recent was on very low volume
Contain elements of support:
    Support weeks
    Base on top of base
    Price above 40-week MA
Price above 40-week MA, but 30-week MA has crossed below it. That could signify some short-term weakness. Huge volume as transitioning from stage 1 to the current stage 2. Show of institutional support.
Shakeout near low of baseYes, at bottom most price range of base
Handle area within upper half of base that drifts down on lower-than-average volumeYes, but volume is not low.
Volume surge of 50% above average at pivotThe pivot hasn’t formed yet.


Past 2 quarters EPS growth >= 25%Yes, 44.29% and 1753.47%
Past 2 quarters margin growth >=25%Yes, last 3 Q’s. 283.93%, 38.11% and 1710.88%
EPS growth >= 25% in past 3 – 5 yearsNo, the previous Q was -9.82% growth, but 3 of the past 4Q’s showed good growth
EPS surprisesNot sure. I don’t have the estimates to know
EPS break outYes, huge BO in the last Q
ROE >= 17%Yes, current ROE is 79.448%
Earnings driftYes, after last Q’s earnings it made a new all-time high


The RS is 81.47% above the SPX and 89.89% above the rest of the Real Estate sector. However, the Real Estate sector is weak against the SPX, at 10.31% below it. The RS is strong, but I worry about it being held back in a weak sector.

It looks like a solid C&H formation. I’m watching the area noted to see if that is the handle forming. As of now the price range and volume is too large. If it continues to drift down with tightening ranges and lowering volume, it could become a good low risk setup.

The other factor is the overall weakness in the market right now. On the other hand, that could work to the patters advantage as the overall weakness could coincide with the drift down that the handle needs. Another note is that the 150-day MA looks like it may cross below the 200-day. That would indicate some shorter-term weakness that would also work nicely into that drift.

Cup Criteria

>= 30% uptrend prior to cup with improving RS and increases in volumeYes, prior uptrend was 63.73%. RS increased 59.23% during that time and 50-day average volume trended higher.
7 – 65 weeks (typically 3 – 6 months)Yes, this has been a long base. It’s currently been forming for over 199 days.
Correction from top to bottom of cup is 12-33%No, the correction has been more significant at 41.35%
More “U” than “V” bottomYes
Decline < 50%Yes, 41.35%
Decline < 2.5X marketYes, it went down to its lowest with the market, but turned higher before the market recovered and has outperformed it since.

Cheat Criteria

Pause in right side cup uptrendYes, as noted on the chart
1/3 – 1/2 way up right sideYes
Pause contained within 5-10% rangeNo, 17.03%
Pause drifts down to lower lowYes
Price range tightYes, at the bottom of the cheat
Volume dried upYes, at the bottom of the cheat

Handle Criteria

Upper 1/2 of cupYes, at top of cup
Above 50-day MAYes
Price drift down to lower lowYes, so far.
> 1 weekIt’s only been 3 days so far, still determining if it is a handle
Price range tightNo, still wide range
Volume dried upNo, still big volume and increasing
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