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In this weekly chart of the same stock we've been looking at, in May, 2013, prices dipped towards the earlier fairly prominent low that formed in October, 2012. In April 2013, a block type pattern developed, with the low being made by the first bar, so that the pattern could be described as narrowing, with the total of four bars establishing the block's upper boundary quite unequivocally. This block pattern was essentially the head of head and shoulders pattern, and its right shoulder. For a description of that, see the previous post. Prices then move up a little, clearly breaking through the upper boundary of the block, or right shoulder. The rule for head and shoulders breakout signals is buy at the upper boundary of the right shoulder, in this case, at $1. An order at that price would have been filled immediately, but prices didn't move up for some time, after the breakout, and the stock could have been bought at the signal price at the end of June, again, and any time in July. A stop below the right shoulder low was never touched, and a substantial and durable rally developed. It would have been easy to sell for a double, and the ultimate top was a triple.



The monthly chart contains an interesting clue to selling, or taking profits. If we took the trade in the weekly chart above, was there any way we could have waited for the high price at 3? Almost incredibly (but this is something I see again and again), there was. The peaky 2012 high predicted the March 2014 top with precision.

There's more to look at in the ten year chart. In late 2008, a block type bottom developed in the monthly chart, with a breakout that December. On a weekly or daily chart at the time, this would probably have looked like a head and shoulders pattern. It's in question whether you could have bought at the upper boundary - sometimes prices don't return after the breakout - but prices did dip towards that price in March, 2009. A distinct up trend followed, though the target price wasn't as explicitly marked as in the example in the weekly chart, top of this post. Still, with a stop in place, risk would have been limited, and the stop would definitely not have been triggered.

Then, in 2012, prices again neared the 2008 low, suggesting a "buy near a bottom" strategy. Though that strategy remains questionable, there then followed, near the 2008 low price, additional buying patterns. In November of 2012, prices broke out above a right shoulder type pattern, setting up a buy at the pattern upper boundary. It's not completely clear on this monthly chart what constituted the upper boundary, but the logical stop loss in that trade held, or very nearly held. Even if, in March or April 2013, your trade from 2012 was stopped out, another buying pattern immediately developed - the trade from the above weekly chart.

Prices are, at the end of the chart, approaching both of the earlier long term bottoms again. It's clearly time to look for buying patterns in the weekly and daily charts, going forward. And the target price is clearly marked at 7. A kind of block pattern is forming, extending from late May to the last price, but I would be suspicious of a breakout. The pattern is too fat, and not close enough to the definitive historic lows. We'll wait and see what develops.