Key Questions at Decision Point

Q1: What price and volume pattern(s) do you see in this chart?
Q2: How many times has this stock tested the intra-day support level (dashed line)?
Q3: Does current price action appear to be consolidating at support?
Q4: What would you expect to happen if it breaks support?
Q5: Can you see/define a tight stop level that might give a good reward-to-risk ratio?


EDIT: There are several good responses to the above questions in the comments. I agree with JTT that multiple timeframes help. In this case, the BIDU daily gave me confidence on the short side - it was testing an upside daily PP zone following a big gap down on Oct 27, 2009.

Review this FUQI chart from a June 30, 2009 post by Jamie where he stated - "Not sure what to call the FUQI setup other than inverse C&H. But if you see a big thrust higher, consolidation, and a big move back down, just draw in the lines and wait for the handle to form. [Target] approx. 100% measured move down...". Note that Jamie drew trendlines around the entire inverse C&H in FUQI whereas I have trendlines on the handle portion only. There are a lot of similarities.


So, what did I see in the BIDU intra-day chart? I saw a gap up, consolidation in the first 20 mins, a big thrust up with volume, small consolidation at the top, a big thrust down with volume - all of the preceding forms the inverted cup - then the handle started to form. The handle (lower volume) turned into a nice 3 PP base (inverted) with lower highs. The target was a 100% extension of the entire C&H pattern - about 6 grid line blocks. I exited half on either side of the target zone.


Today (Thursday 11/12), BIDU formed an IB on the daily - interesting.