Summary
I want to watch this one because I haven’t come across this situation yet. Stan Weinstein talks about a Stage 3 possibly breaking back into a Stage 2, instead of 4. I believe that might be what’s happening here. From my stage analysis it looks like a big Stage 3 C&H, which is currently in the handle. If that’s the case, I want to watch and see if there is a BO at the PoLR and catch a new Stage 2 at the very beginning.
Stage Analysis
Typically, I’d do a Stage 2 criteria analysis here. However, I don’t think we are in Stage 2. If I’m correct, you can see from the chart above it’s in a large Stage 3 C&H that looks to have the potential to break back into a new Stage 2.
Base Count
Again, as above, I would usually do a base structure analysis here. But since it’s not a Stage 2, there are no bases yet to analyze.
Technicals
I am concerned about the magnitude of drop on the left side of the cup. Typically, anything more than a 50% drawdown creates too much overhead supply. However, in this case, the left side of the cup went up over 300% on big volume, which should have absorbed all that supply.
Also, the RS within the Technology sector is a strong 86.42%. However, the Technology sector is underperforming the SPX by 6.06%. The sector performance could be a drag on the price.
Cup Criteria
| QUESTION | ANSWER |
|---|---|
| >= 30% uptrend prior to cup with improving RS and increases in volume | YES, prior to the cup was a Stage 2 advance of over 1,300% |
| 7 – 65 weeks (typically 3 – 6 months) | NO, just over at about 70 weeks |
| Correction from top to bottom of cup is 12-33% | NO. 73.84%, see comment above |
| More “U” than “V” bottom | YES |
| Decline < 2.5X market | YES |
Handle Criteria
| QUESTION | ANSWER |
|---|---|
| Upper 1/2 of cup | YES |
| Above 50-day MA | YES |
| Price drift down to lower low | YES |
| >= 1 week | YES, 2 weeks |
| Price range tight | YES |
| Volume dried up | YES, volume has decreased significantly |
Fundamentals
Earnings
| QUESTION | ANSWER |
|---|---|
| Past 2 quarters EPS growth >= 25% | YES, 94.23% and 1.96% |
| Past 2 quarters margin growth >=25% | YES, 76.06% and 0.74% |
| EPS growth >= 25% in past 3 – 5 years | YES, 80.36%, -1.89% and 142.86% |
| EPS surprises | N/A no estimates available |
| EPS break out | YES, 2 Q’s ago 750% QoQ |
| ROE >= 17% | N/A |
| Earnings drift | YES |
