$PMTS – WATCH: Stage 3 Breaking Back to Stage 2


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.


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

>= 30% uptrend prior to cup with improving RS and increases in volumeYES, 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” bottomYES
Decline < 2.5X marketYES

Handle Criteria

Upper 1/2 of cupYES
Above 50-day MAYES
Price drift down to lower lowYES
>= 1 weekYES, 2 weeks
Price range tightYES
Volume dried upYES, volume has decreased significantly



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 yearsYES, 80.36%, -1.89% and 142.86%
EPS surprisesN/A no estimates available
EPS break outYES, 2 Q’s ago 750% QoQ
ROE >= 17%N/A
Earnings driftYES
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