Rather than title this article "Amazing Chart of the Day " maybe we would all be better served call it :

You know This Make No Sense!

As you read on you'll know why we say that. In the meantime for those of you who don't like having to chase a stock and feel good for a few days only to see a few days later the stock turn around hard with you in it then this article is for you!

At All About Trends we spend a lot of time on how to buy stocks at alternative entry points vs. mainstream buy this, buy that with no regards for whether the stock is extended or in the gutter or even locked in a nosedive downtrend. Alternative entry points are also a form of risk management.

We've all heard about the Cup And Handle pattern right? A cup and handle pattern takes place typically AFTER an issue has made a run then goes into a correction. That pattern is more geared toward buying the issue as it breaks out into a new high AFTER its already completed the whole correction. In most cases that breakout tends to take place AFTER a stock has already expelled a lot of energy getting to the breakout into a new high zone.

But first let's talk about Cup and Handle patterns for a moment, as in what do they look like. Take a look at the chart below of LNKD.

The breakout into a new high after it put in a handle (pink line POH) was the buy point using that strategy. Now that's all fine and dandy and we have no qualms about that entry as we've done them on many occasions over the years so we have nothing bad to say about it however? For us we ask :

Was there a better pattern building that afforded a lower entry point?

Was there an entry point to be had that afforded a lower risk entry point? .

This is where the right side crossover pattern comes into play!

So for us rather than buy a stock that has already expelled a lot of energy getting to the breakout point we prefer a lower risk not have to chase it alternative entry point. We call that pattern a "Right Side Of Cup Crossover".

With regards to cup and handle patterns, it helps to know what exactly the components of a cup and handle pattern are. Folks, pay attention here as this IS important.

BEFORE YOU CAN HAVE A COMPLETED CUP YOU MUST HAVE A LEFT SIDE OF CUP (downward correction) A BOTTOM OF A CUP (sideways bottoming base building) THEN AND ONLY THEN can you have the magical RIGHT SIDE OF CUP Crossover pattern take place.

Below is what those components when put together look like.

Before All About Trends existed I wrote an article on this subject back in October 2007 does everyone remember what happened in 2007?. Believe it or not that article was what ultimately led to All About Trends being formed. In that article I had a few examples of "Right Side Of Cup Crossovers" so let's revisit a few of those charts from the past for starters. I bring these two up to show you why buying the breakout of a cup and handle isn't always the greatest play as you'll see. At early stage bull runs? Sure, late stage mature bull market runs? Odds are greater of failure.

CYNO

RRST

See how much energy CYNO and RRST expelled from the crossover entries in pink to the traditional breakout of a cup level? This is why we say THIS MAKES NO SENSE TO US. Why on earth would you want to buy any stock right AFTER its made a big move in a short period of time is beyond me. That is not using risk management as a guide if you ask us when it comes to buying stocks at alternative low risk entry points, its called chasing a bus. But that's us, to each their own as they say. Now that may be all find and dandy when you are in early stage bull market phases but what about when the markets are in a mature phase and have been running for some time? Well the answer to that is they tend to head fake shake and bake people by breaking down and rolling right over. Take a look at the charts below

Notice anything else about the two charts above? Take a look at what year and what month of the year those snapshots were from. Anyone remember fall of 2007? It was the climax run where the sun was so bright everyone had to wear shades just before it topped and started the bear market. That's what I meant when I said mature markets buying breakouts is a much higher risk stance than buying something at or near a decent support zone.

By the same token if you are wondering why a fair amount of names breakout and roll right back over , sometimes with you sometimes not? It has a lot to do with this alternative entry pattern because those who take this trade entry already have nice gains under their belt vs the late to the party crowd first buying it AFTER its already made a nice move.

Now let's take a look at a more current example called Barracuda Networks (CUDA).

Now that you know what a cup and handle looks like, what the components are, what the trigger points are lets take a look at a few names that may be developing.

WAGE

ICLD

PRLB

With PRLB the traditional breakout of a base into a new high entry points are around $84+. So if we were to use that entry that means the stock would have to move from here up 13% before we buy it. You Know This Makes No Sense Right? In the world of swing trading? That kind of move alone is a home run.

Now let's look at a name that recently did breakout of cup and handle pattern and kept going after the breakout.

So in summary, we have no problems with the cup and handle formation and buying the breakouts but a much better entry is to be had by being aware of an alternative lower risk entry (especially in mature bull markets) point such as the "Right Side Of Cup Crossover" entry.