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Friday, October 15, 2010

The Setup

This blog is about sports and stocks.
The one thing that really gets me going with this blog more than talking sports and fantasy football is stock pattern investing.

One of my watch list stocks (HOGS) had some really great setups over this past week.

I first took notice of this stock as it made its initial break out and was forming a new resistance level close to $18. The first pattern is an ascending triangle patter that shows a rising strength pattern of continuously lows ascending to a common point of resistance. As it reached the breakout point, a good rise in volume (the lower bar graph) provided good momentum to sustain the upward trend.

The stock then leveled off around $20 and showed a good "resting" pattern and never really dipped below the $20 support level. The only question was, what would it do next?

Well, towards the end of the day on Wednesday, the stock showed yet again an increase in volume and momentum and broke above the $20.50 resistance level. This upward pattern continued into an amazing 3 tier or (step) pattern. When this happens, and it does not always work out, but when it does a sudden spike upward in price happens after the 3rd tier. Almost always followed by a pull back down until a new support level is reached. In this case, at least for Thursday, it appeared to be around $21.00.

The pattern was actually looking like it would form either a "W" pattern or double bottom pattern, and I was actually a little worried that it did dip below $21 momentarily. But, the stock recovered nicely and as is characteristic of a possible new break out experienced a sudden spike in activity at the end of the day and burst up to $22.00 for a brief moment before the close of the market and a final daily close just below $21.50.

It will be really interesting to see what it does next. Will it continue it's rise to form yet another ascending triangle patter and potentially yet another larger 3rd tier pattern?

Or will it cool off for a while before testing new levels of resistance and support?

Of course I will watch this stock for the rest of the month, but for now I am really psyched that all these patterns happened and that my investment ideas worked as well as they did.

See, I place a buy limit order for when HOGS reached $18.00 per share and then a sell limit order of $21.60 for a nice 20% gain.

Not bad for a weeks worth of investing.


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