(Click On Chart To Enlarge)If we bought TZOO on the breakdown of the nested TRIPLE H&S Top near $50, predicated on some opinion that we had about the shorts "having" to get clobbered, or TZOO "being cheap," we would have been very unhappy campers when the stock sank into the 16s. We would have been sitting on a paper loss well in excess of 60%. UGH.
And, if we remained "stuck in that opinion," and didn't avail ourselves of the ONE opportunity go get out TZOO at $50 on the horrific short squeeze that finally did eventuate, we'd still be very unhappy campers, 2 1/2 years later: TZOO is at $22. UGH.
The Bullish Falling Wedge
In mid-April, 2006, after TZOO put in the parameters of the Bullish Falling Wedge pattern, that's where we KNOW that the shorts who stayed too long at the fair "could" be in BIG trouble.
If the upper trendline (connected by Blue #2 and Blue #4) gets taken out to the upside, watch out!
It not only got taken out, it was a HUGE gap up from 19.98 to 26.64, and TZOO went on a five-day "Mother of All Short Squeezes" rampage, to 52.24. Have mercy!
Actually, there isn't any mercy shown if we're caught short, and we don't cover. MERCILESS.
Could we KNOW that was going to happen? No, we can't "know the future," and certainly not the extent of the rally, but here's what we did KNOW:
1. That a Bullish pattern had formed, and we could measure the target IN PLAY "if" it broke out. The target was exceeded by a very wide margin, due to the effect of the short squeeze.
2. That the shorts were right for a long time, but if they were caught short on a breakout of a BULLISH pattern...oh, buddy! EXPLOSIVE power to the upside.
3. That TZOO didn't just breakout, it was a Breakaway Gap out a bullish pattern! (read about those at this Chart School link. Click on "Gaps And Gaps Anaylsis" down at the bottom: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis
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