Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

OSK – Oshkosh Truck Cup with handle

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OSK recent carved a cup with handle that caught my eye, but it had the classic signs of caution.

First the chart. Click on it to make it bigger.

OSK -  Oshkosh Truck Cup with handle

Note nice uptrend in the stock in the months prior to the stock forming the consolidation. (Lesson: look for relative strength) There’s a hiccup at the bottom of the base at Pt A. Usually I like to a nice smooth curve. I’ll live with a “v” shape now and then, but having a pattern interruption like this is a yellow flag.

Let’s zoom in on the handle, since that’s where the action is.

OSK Cup with Handle

The handle started forming at point B, on Oct 1. The stock had advanced in the prior few week, but had hit some resistance and started moving sideways. The typical buy point from this pattern is when the stock resumes its advance and moves above that point B by at least 10 cents. We see on Oct 22 it tried to press higher at Point C, and came within 20 cents of the proper buy point, but just couldn’t muster the horsepower. It has since rolled over, and investors that jumped the gun anywhere in that handle are now down perhaps $3-$6 per share.

It’s important to note that while volume was muted in the handle (between B and C), which is proper, trading volume did not accelerate on the breakout day. If a stock is going to power higher, it’s better to have an increase in trading volume to validate the move higher.

Written by heyercapital

October 24, 2007 at 9:09 pm

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