ANATOMY OF A TRADE
Pattern Prediction
The Scoring Trade
by Thomas Bulkowski
Here's a scoring system for symmetrical triangles that helps predict performance.
How do you make money in a bear market without selling short? By picking winners. How do you gain the experience necessary to pick winners? Good question. Someone once said you should print a chart of your favorite stock each morning, stare at it for eight hours every day, and then -- two years later -- trade the stock. There is much truth in that: acquiring experience has few shortcuts.
I review 225 stocks daily, but it takes just 15 minutes. As fast as the computer can load each chart, I'm ready to move on to the next one. I only stop if I see something interesting.
One of those interesting events was a trade I made in WPS Resources Corp. (WPS) using my scoring system for chart patterns.
SETUP
If you pulled up a 2001 chart of WPS on the Internet, it would look like Figure 1: a bar chart on the arithmetic scale with volume drawn along the horizontal axis. Do you see anything interesting? Something is different here, something exciting. What is it?
FIGURE 1: TYPICAL BAR CHART. Do you see anything unusual?
...Continued in the March 2003 issue of Technical Analysis of STOCKS & COMMODITIES.
Excerpted from an article originally published in the March 2003 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2003, Technical Analysis, Inc.