HMS Breakout Came After It Improved Chart

• Paul Whitfield
• On 6:23 pm EDT, Tuesday October 20, 2009

Two weeks ago, the chart of HMS Holdings (NasdaqGS:HMSY - News) was discussed here.

Two factors appeared to be in conflict. It was showing tight trading, a positive. But it had little accumulation in the base, a negative.

Since then, it added two weeks of accumulation while continuing to trade tightly.

On Monday, the health benefits cost-containment provider broke out of a cup-with-handle base in fast trade.

The buy point was 41.70, and HMS is hovering near that trigger.

The breakout, however, didn't come under perfect conditions.

The handle, for example, showed the desired lower lows for three sessions and then some upward action before breaking out.

Ideally, you'd prefer to see five sessions of lower lows.

The last two days of the handle weren't an example of wedging, which involves higher lows. One of the days had a higher low and the next day had a lower low.

Even so, it was less than ideal.

Another negative is the Relative Price Strength line. It rose the past five weeks but isn't near a high.

This doesn't mean the breakout can't work. But given HMS' mediocre 61 RS rating, it might need more help from the general market than would a stock with a stronger RS.

Buzz up!