Cup and Handle with ZFGN, SFUN and CHAP. I'm also a penny fan!

2020년 1월 15일

ZFGN has been showing the cup and handle pattern on its daily chart. With the shape of a flat "U" and a slight down drifted-handle on the right, ZFGN is considered a sign of bullish continuation. The length of its "U" period indicates the bottom has been consolidated and the risk has been shaken out. Volume remained lower than average in the base of the bowl, selling side liquidity sufficiently dried up. And on the right side of the bowl, we could see a bull volume expanded once again as the interests strengthened which is also an additional confirmation of a bullish sign.
As the handle been forming on the right side, a selling pressure against its prior high is taking place, but the good side is, it still shows a higher low which viewed as an essential sign as the stock got some big players or managers' attention.
So selling pressure is likely to make price consolidate with a tendency toward a downtrend for a period of days to weeks before advancing higher.
A trade set up could made from here with a stop loss at the previous low or even higher to the recent consolidating base as the two lines underneath price shown above. For the target level, I would rather consider the previous base that stock consolidated before the bowl in the past.
Cup and handle usually managed out the volatility risk as the ATR indicator is reaching to its yearly record low in this case, so only time and momentum(DMI, volume) matter to traders.
Besides, I also find some similar candidates such as SFUN, CHAP. All three of them are from a different industry( Biotech, Energy, Internet services), so this is where you should really concerned about. The dissimilarity among them are CHAP has a shorter "U" length and SFUN got lifted a bit already (volatility picked up), so you may take these factors into your trade set up to see if you are gonna play with the pattern or not.