Saucer-Shaped Base May Be A Stealth Star In The Making

Investor's Business Daily

Don't get bored by a sideways-moving stock. You might be looking at a saucer-shaped base in the making.

Saucers are tricky. You think it's going nowhere because it's been months since the stock declined modestly, and from there has been marking time. is probably quite low. Nobody cares.

By the time the stock starts its right-side construction, it's probably fallen off your radar screen. That's too bad because the saucer-with-handle and the saucer-without-handle can be perfectly valid bases.

Does it matter that market attention has turned to other stocks during the long saucer-building process

Au contraire, that makes the base all the more powerful, like a surprise attack.

The saucer base is a variation on the cup-with-handle or cup-without-handle base. What are the numerical parameters to distinguish a saucer from a cup? There aren't any.

But generally, the saucer runs longer and shallower than a cup-type base, hence the name "saucer.

Maybe that sounds subjective. But, after all, it doesn't change what you should be looking for.

• First, like all bases, the stock must initially show a 20% to 30% .

• Symmetry is important. The left side of the pattern should look much like the right.

• Volume in the base should be mostly tame, although some high-volume action is nice.

• If a appears, it should be in the base's upper half.

• Most of the base should appear above the 10-week moving average line, as should the .

• The should spark a volume surge of at least 40% above average. But the more, the better.

Copa's Saucer

Panamanian airline Copa Holdings (CPA) built a 33-week saucer-and-handle base from January through August 2006. The base held a 26% correction, but most of the trading was in a narrower price range than that.

Copa was difficult. You could have waited for the traditional buy point, 27.50, or a dime above the left-side high.

But the true signal appeared at 23.75, an early entry that appeared as a point Aug. 2, 2006. The stock soared to 73.33 in an 11-month run.

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