The three major indexes all suffered steep declines this week and the NASDAQ Composite suffered most with two big distribution days on Tuesday and Wednesday. On Thursday, the NASDAQ found support at the 50 day moving average level and went on to have the biggest gains of the three on Friday. The NASDAQ is the only one of the three to be above the 50 day average and the only one that our trend indicator considers on an upward trend.

No new Features this week.
 

Cup Depth of Little Importance to Breakout Day Performance

Following last week's analysis of the significance of handle depth to breakout day performance, I was asked if there was an optimal  cup depth.

The chart below shows a scatter plot of breakout day gain versus cup depth as a % of left cup for all successful breakouts since January 2014. Cup depth is measured from the left cup high to the base low and then expressed as a % of the left cup high .

The red line is a polynomial regression line, or line of best fit, through the observations.

Firstly, notice that there are very few breakouts with cup depths less than 8%, although breakout day gains of up to 8% are possible although rare.

Secondly, most breakouts occur between cup depths of 10% to 40% but there are still many breakouts at even deeper depths. The cut-off at 60% is due to our not listing cups with a depth greater than 60% on our cup and handle watchlist.

Finally, although there are some high gain breakouts for cup depths between 30% and 40%, they are rare and outliers to the general trend.


Conclusion

There is no optimal cup depth for strong breakout day gains from the cup and  handle watchlist, but shallow cup depths (less than 8%) rarely produce breakouts.