Today I’m going to show you 3 stocks. Each is setting up for a potential surge higher. And they are all forming the same pattern. It’s one of the most effective chart patterns there is…
The cup and handle.
The cup and handle pattern was introduced by William O’Neil. O’Neil is one of the greatest technical trades who ever lived. He is the founder of Investor’s Business Daily and author of “How to Make Money in Stocks.”
The cup and handle pattern is fairly straight forward.
It looks like this…
The pattern forms as a stock tests old highs.
At this point, it is likely to incur selling pressure from investors who previously bought at those levels.
That selling pressure causes the price to consolidate and trend lower for a few days to a few weeks before advancing higher.
Once the upper trend line of the handle is broken, that is the trigger to enter the trade.
Alternatively, some traders prefer to wait for the previous highs (top of the cup) to be broken before buying.
For a profit target, use the depth of the bowl.
In the example above, the high of the cup is $42 and the low is $32.
That’s a “depth” of 10 points.
So you would be targeting a 10-point move higher from the breakout point.
Let’s look at 3 stocks showing cup and handle patterns today.
Idexx Laboratories (IDXX)
IDXX is demonstrating a textbook cup and handle pattern.
After reaching a high near $570 in February, shares re-tested that level at the end of April.
Price then drifted lower for three weeks and is not beginning to breakout above the upper trend line of the handle.
The cup depth is 100 points.
So the profit target would be roughly $630.
Marinemax (HZO)
Another one is Marinemax.
We are currently two weeks into the handle formation awaiting a breakout higher.
The trigger to enter the trade would be a move above the upper trend line of the handle.
And we would be targeting a move of $17 per share.
Jefferies Financial Group (JEF)
Lastly, there’s Jefferies.
The boutique investment bank is absolutely crushing the fundamentals.
The company grew sales by 89%, 68% and 79% over the last three quarters.
And earnings were up a whopping 476% last quarter.
O’Neil’s profit target would be roughly 5 points, but I believe JEF could go much higher.
All three of these stocks have more going for them than an ideal chart pattern.
They also meet each of my 5 Stock Surge Indicator criteria.
- Triple momentum higher
- Stock price at least 30% above 52-week low
- Revenue growing by 25% or more
- A stock “surge” score above 75
- Custom money flow reading above 50
So keep an eye on these three stocks.
Thanks Ross i really appreciate the tips.
Ill be watching these.
Have a great day mate.
Cheers
Wayne
Sure thing Wayne. I hope it helps.