The cup-with-handle is a chart pattern that identifies stocks preparing for uptrends. Here are the steps to convert this pattern to a set of rules for screening your stock database to identify likely candidates.
The CANSLIM approach to investing
combines technical and
fundamental analysis to identify
some of the promising
stocks in a cycle. According to
the system, only those stocks
meeting a set of quantifiable
criteria are candidates for purchase.
In addition, a stock must
exhibit one of three or four
different chart patterns that
summarize less quantifiable aspects of the system.
Manually screening for stocks that meet these criteria is a
daunting task. To be successful at this system, the investor or money manager should use either The O’Neil Database or
Daily Graphs, as well as Investor’s Business Daily. In addi-tion
to using these references, the investor must comb through
hundreds of stocks daily to find stocks that have set up
according to the system and then monitor each candidate
stock for days or weeks, waiting for them to break out.
Visually screening the more than 2,400 stocks in Daily
Graphs each week and then monitoring them is a full-time
job. And, equally important, this approach misses many
stocks as they break out and misses others that do not make
it into these publications.