The S&P 500 index, Dow Jones and Nasdaq composite all started last week higher but closed the week modestly lower. This sideways stock market action offered a chance for many leading stocks to work on handles in their consolidations. Facebook (FB), Twitter (TWTR) and Akamai Technologies (AKAM) finished handles last week, offering new buy points. Google parent Alphabet (GOOGL) and Alibaba (BABA) finished handles on Monday.
With the major averages rallying solidly Monday, all five stocks rallied at least 1%, with Twitter attempting a breakout.
Why Handles Matter
Handles offer a last shakeout of weak holders. When a stock clears a proper handle in strong volume, it’s evidence that the stock is ready to advance.
What Is A Proper Handle?
Proper handles involve at least five days of moderate declines, though some develop over several weeks. You want to see a gradual drift, ideally in light trade. Heavy trade would imply selling from big institutions. The midpoint of the handle should be above the midpoint of the base. If a handle forms in the lower half of a pattern, there may still be selling pressure as old investors seek to exit with a profit or minimal losses.
While handles are most closely associated with cup bases, they also form on double-bottom patterns. Twitter and Akamai stocks are cup-with-handle bases, while the Facebook stock handle is on a double bottom. Alphabet and Alibaba stocks are trying to finish handles in double bottoms.
S&P 500 index, Dow Jones and Nasdaq composite all started last week higher but closed the week modestly lower. This sideways stock market action offered a chance for many leading stocks to work on handles in their consolidations. Facebook (FB), Twitter (TWTR) and Akamai Technologies (AKAM) finished handles last week, offering new buy points. Google parent Alphabet (GOOGL) and Alibaba (BABA) finished handles on Monday.
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With the major averages rallying solidly Monday, all five stocks rallied at least 1%, with Twitter attempting a breakout.
Why Handles Matter
Handles offer a last shakeout of weak holders. When a stock clears a proper handle in strong volume, it’s evidence that the stock is ready to advance.
What Is A Proper Handle?
Proper handles involve at least five days of moderate declines, though some develop over several weeks. You want to see a gradual drift, ideally in light trade. Heavy trade would imply selling from big institutions. The midpoint of the handle should be above the midpoint of the base. If a handle forms in the lower half of a pattern, there may still be selling pressure as old investors seek to exit with a profit or minimal losses.
While handles are most closely associated with cup bases, they also form on double-bottom patterns. Twitter and Akamai stocks are cup-with-handle bases, while the Facebook stock handle is on a double bottom. Alphabet and Alibaba stocks are trying to finish handles in double bottoms.
Facebook Stock
Facebook stock formed an oddly shaped, double-bottom base, with the second leg of the W falling sharply lower amid the Cambridge Analytica data privacy scandal. The stock cleared a 186.20 buy point on May 11, but volume was well below average. Indeed, shares had been rallying for a few weeks on weak trade.
But after that tepid breakout, Facebook stock has pulled back modestly in even-lighter volume. As of Friday’s close, Facebook stock has a handle with a new 188.42 buy point. Shares closed Friday at 182.68.
Facebook rose 1% to 184.49 in stock market trading today.
Keep in mind that the relative strength line, which tracks a stock’s performance vs. the S&P 500 index, has been lagging since the start of November and hasn’t made headway for the past 10 months.
Twitter Stock
Twitter has formed a cup-with-handle base with a 33.88 entry. Much of the base formed below its 50-day moving average, though the handle is moderately above that level. Twitter stock price ended Friday at 32.63.
Twitter climbed 3.1% to 33.63 Monday after rising as high as 34.03. The breakout attempt came on below average.
Akamai Stock
Akamai Technologies formed a cup base since March 9, forging a handle last week. That gives the stock a 77.69 buy point. Shares closed Friday at 75.34. They climbed 1.5% to 76.46 Monday.
Alphabet Stock
The Google parent rose 1.3% to 1,084.80 on Monday. As of Monday’s close, Alphabet stock has a proper handle with a 1,118.25 entry point.
However, the midpoint of the handle is just above the midpoint of the base. While that’s proper, it also means a fair amount of overhead resistance could remain.
Also, the stock’s RS line has gone sideways for year, as Alphabet has moved in line with the S&P 500 index.
Alibaba Stock
Alibaba has formed a shallow double-bottom base. On Monday, shares rose 1.35% to 197.64.The stock now has handle on a daily chart, creating a 200.10 entry.
But on a weekly chart, this potential handle isn’t visible, because Alibaba rose fractionally last week. The handle buy point also isn’t much lower than the 201.60 entry from just above the middle of the double-bottom’s “W.”
At minimum, Alibaba’s stock appears to be facing resistance at 200. The stock hasn’t been above 200 since the mid-March peak of the middle part of the W. So blowing through that level in heavy volume would be encouraging.