CSUN: Possible Right Shoulder

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The pattern in purple is a Falling Wedge. Breakouts above those generally aren't particularly bullish. As we can see, the "breakout" occurred very near the recent low. Often, those breakouts are nothing more than "breaks above" a severely down sloping trendline, like the one here. But, as we also can see, the breakout of this particular Falling Wedge was a very good one.

Falling Wedges are notorious for morphing, or changing, into Bullish Inverse H&S patterns (blue circles), and we've got just that prospect right here. The neckline is 11.53 and yesterday's 11.57 high.

Theoretically, the low of this "possible" Right Shoulder shouldn't go below the low of the Left Shoulder, which was 8.56, because selling interest should dry up in a Right Shoulder. We'd also like to see less volume on this selloff, further indicating less interest in selling.

On a long entry, many players will use a print below 8.56 as the stop. 8.55...8.54...or, even 8.49, below the "round" 8.50. We really wouldn't want to see this "possible" Right Shoulder go lower than the 8.56 Left Shoulder low, though. That's a technical flaw, although I've seen a few of them work out okay, especially if the neckline has a downward slope. This neckline doesn't have a downward slope, so again, we'd want to see a Right Shoulder low above 8.56 if that is, in fact, what we've got forming.

A 50% retracement of the recent rally is 8.985. The Kijun-sen (solid red line) in the Ichimoku Kinko Hyo chart ("At a glance...the Table of Balance") comes in today, December 6, exactly at 8.985, so something near there (low 9.00s) looks to be a good entry long. The risk on a stop out would be roughly 5%. The Tenken-sen (solid green line) comes in today at 9.12, so an entry long there would be a risk of a little over 6% on a stop out.

If CSUN can complete a Right Shoulder and breakout above the 11.53-11.57 neckline, that would put an upside target of 16.66 IN PLAY, for a gain of 85% from an entry of 9.00 if the target gets MADE. Risk:reward would be 1:16. The IPO high was very near the target, at 16.70. The October 10 high of 14.78 also would be an upside target and a good area to take at least some profits if that gets MADE.

Math for the 16.66 Bullish Inverse H&S target:

11.53 - Neckline (the more conservative of the 11.53 and 11.57 data points)

6.40 - Low of The Head

11.53 - 6.40 = 5.13 points added back to 11.53 = Target: 16.66 IN PLAY