Here we have separated the completed H/S cases where the stock is above above the 65-dma
and those where it is below it when the neckline was violated. Without a Peerless major Sell, we
have to be much more careful with our short sales.
There were 39 completed H/S patterns where the neckline's penetration occurred with
prices below the 65-dma. In 22 of 39 cases, prices fell to the minimum downside objective
before the end of the year. 17 did not. Only 19 of the 39 fell more than 10% from the
close the day the neckline was penetrated. Keep in mind that this was a period in which
the DJI steadily rose except for a 6% decline in December.
H/S Completed with Prices below 54-dma
--- Neckline Break ------- ------------------------- Outcome -------------------------------------
Date IP21 Close Recovery Low Decline Minimum Objective Opct
at Low Met? Price
-------------------------------------------------------------------------------------------------------------------------------------
AA Aug 6 +.05 8.47 -- 6.8 19.8% Yes 8.32 .268
ADI June 12 +.059 1.65 1.7 1.17 29.1% Yes 1.37 -.127
ADM Aug 19 -.019 9.34 Failed two days later when it shot back above both neckline
and 65-dma.
AMAT May 21 -.009 0.45 Failed four days later when it shot back above both neckline
and 65-dma.
CAG Oct 8 -.18 14.33 15 14 2.3% No. 9 -.015
CMS April 18 -.024 29.00 - 17 41.4% Yes 25.90 -.174
DOW March 19 -.175 16.75 --- 15.4 8.1% Yes 15.5 -.235
FMC Nov 15 +.045 12.59 --- 11.5 11.8% Yes 11.9 .137
FRX Aug 27 -.241 4.69 --- 3.56 24.1% Yes 4.0 -.31
HSY Sept 9 -.172 9.94 10.3 9.25 6.9% No 90. -.259
JCI Nov 19 .037 2.76 --- 2.52 8.7% Yes 2.55 -.081
JCP July 3 -.140 25.38 --- 23.75 6.4% Yes 23.75 -.132
JWN Sept 25 .048 11.25 --- 8.0 28.8% Yes 9.0. -.126
KMB Aug 8 -.093 23.16 24 21.5 6.7% No 20.5 -.169
LOW May 14 -.113 0.97 --- 0.9 7.2% Yes 0.92 .228
After fulfilling its downside objective, this stock jumped to a new high. The OPct was
a warning to short sellers not to hold for to low a price.
MDP June 25 -.013 6.94 --- 6.0 13.5% Yes 6.25.
MHP July 18 .068 7.08 7.12 6.27 11.4% Yes 6.30
MMC June 7 .027 12.69 13.30 11.75 7.4% No 11.25
It did fall gradually to 11.25 in November.
The pattern was tall and downsloping.
NKE May 15 -.112 5.13 -- 4.5 12.3% No 4.0
NTRS Nov 18 -.104 7.83 --- 7.5 4.2% No 7.25.
NOC Sept 6 -.015 13.5 -- 10.9 19.3% Yes 11.25
OKE June 24 -.103 7.31 -- 6.25 14.5% Yes 6.6
PGR June 20 +.34 1.5 1.55 1.25 16.1% Yes 1.35
PH March 21 -.13 7.37 .-- 7.15 3.0% No 6.25
This was tall, downsloping pattern.
PH Aug 9 -.295 7.74 -- 7.30 3.0% No 6.6
This was very tall pattern.
RSH June 20 -.142 7.44 -- 5.90 20.7% Yes 6.0
S June 19 -.177 12.47 -- 10.00 19.8% Yes 11.75
STR Nov 18 -.146 1.78 -- 1.59 10.6% Yes 1.6
SWN July 29 -.008 1.41 1.52 1.32 6.4% No 1.29
TGT Oct 3 -.306 5.87 -- 4.75 19.3% Yes 4.8
TXN May 1 .021 2.45 -- 1.66 32.2% Yes 2.07
UTX Apr 16 -.066 5.48 6.11 5.41 1.3% Yes 5.42
VAR April 17 -.146 2.66 2.90 2.00 24.8% Yes 2.37
WY Aug 19 -.06 9.58 10.70 8.58 10.5% No 8.40
Objective was reached in Feb 1992.
The biggest decliners were:
CMS 29 to 17 6 months and 1 week.
TXN 32.2% in 3 months and 2 weeks.)
ADI 29.1% in 3 months and 2 weeks.
JWN 28.8% one month.
VAR 24.8%in 4 months 1 week.
FRX 24.1% in 2 weeks
RSH 20.7% in 2 months
Having an Opct score below -.10 on the breakdown seems to help find the best short sales.
la/ma 21dmaroc IP21 Opct CP%-Pr%
CMS 4/18/1991 .962 -.394 -.024 -.174 .22
TXN 5/1/91 .92 -.281 -.021 -.274 -.02
ADI 6/12/91 .921 -1.656 .059 -.127 .65
JWN 11/25/91 .971 -.832 .002 -.117 .05
VAR 5/17/91 .913 -1.465 -.146 -.164 .14
FRX 8/27/91 .928 -1.026 -.241 -.31 -.35
RSH 6/20/91 .924 -.505 -.142 -.101 0
Eliminating from consideration, the cases where the la/ma is above .94 would have eliminated
4 of the 5 biggest losers and only 2 of the 7 biggest decliners..
The five biggest failures:
ADM 8/19/91 .962 -.825 -.019 -.346 -.18
AMAT 5/21/91 .917 -2.896 -.009 -.23 -.15
UTX 4/16/91 .967 -.707 -.066 .055 -.27
CAG 10/ 8/91 .947 -.654 -.180 -.015 .01
NTRS 11/18/91 .98 -.125 -.104 .072 -.19
Waiting for the Closing Power to hook up after the first sell-off would have consistently
achieved trading gains, but they were mostly under 10%.
AA 8.47 ---> 7.47
ADI 1.65 ---> 1.58
ADM 9.34 .
AMAT 0.45
CAG 14.33 ---> 14.29
CMS 29.00 ----> 25.82
DOW 16.75 ----> 16.17
FMC 12.59 ----> 11.95
FRX 4.69 ----> 4.02
HSY 9.94 -----> 10.02
JCI 2.76 ----> 2.58
JCP 25.38 ----> 24.25
JWN 11.25 ---> 9.94
KMB 23.16 ---> 22.81
LOW 0.97
MDP 6.94
MHP 7.08
MMC 12.69
NKE 5.13
NTRS 7.83
NOC 13.5
OKE 7.31
PGR 1.5
PH 7.37
PH 7.74
RSH 7.44
S 12.47
STR 1.78
SWN 1.41
TGT 5.8
TXN 2.45
UTX 5.48
VAR 2.66
WY 9.58
Others - where break in neckline occurs with stock above 65-dma.
Example CPB
CPB May 13 +.075 19.69 20.1 18.1 CP broke downtrend.
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