Some Cups Form "High" Handles - According to William J. O'Neil in his legendary stock market trading book "How To Make Money In Stocks," the cup-with-handle base is the strongest chart pattern for growth stocks to stage a big price move.

In a normal "cup-with-handle" base, the handle ideally starts to form near the high of the left side of the "cup." But sometimes the stock price moves above the old high and and the handle starts forming later. The stock may still be buyable.

Here is a chart of Interparfums Inc. (IPAR) for May 3, 2007. We see that the left side of the cup topped out at 21.77 on November 17, 2006. The stock's base has shown good accumulation and the Relative Strength line is strong.

Inter Parfums never formed a proper handle before it crossed the "buy point" ($21.87 or the prior high, plus ten cents). Then on April 20, 2007 IPAR blasted out of the base on huge volume, a very good sign.

The stock closed at $23.46, or 7.27% above the proper "buy point." At this point the stock was already too far extended in price to buy. Our rules tell us not to purchase stocks more than 5% past the "buy point."

Patience seems to have paid off however. The stock formed an eight day handle (more than the 1 week minimum required). There were areas of quiet trade on the 3rd, 4th, and 5th days. And the handle "drifted" down slightly which serves to "wear-out" some of the "weaker" holders.

On May 3rd, IPAR blasted out of it's high-handle on the biggest volume the entire base has seen. It closed just below it's new "buy point" of $23.63 at $23.48.

Return to Tutorials Page