Classic Techniques  |  OCT 1998

Cup-with-Handle and the Computerized Approach by Rick Martinelli and Barry Hyman

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.

by Rick Martinelli and Barry Hyman