AGU: Before And After

We last looked at AGU when the H&S Top target of 35.90 got MADE, on July 10. It was one of many examples of an unorthodox H&S Top because the Right Shoulder was significantly higher than the Left Shoulder, but the June 17 "Take No Prisoners...Just For Openers" Breakaway Gap down open below the neckline gave a strong suggestion that the pattern was valid, and that the target would get MADE, or at least come reasonably close.

When we looked at that chart, it was discussed in the Comment Section that this actually could be a DOUBLE H&S, as drawn here. Anything is possible. Our job is to follow Ms. Market, and try our best to do what we're told to do. It ain't glamorous, but we would do well to become good "order takers." (Not easy for folks who have a lot of energy in the fire signs...they want to TELL Ms. Market what to do ... LOL).

If we shorted this "possible" DOUBLE H&S Top breakdown, the best place to do it was on the break of the second neckline, or on a retest of the neckline, once it's broken. How would we know if we got it wrong?

1. A move, and especially a CLOSE, back above the neckline (or any pattern breakdown) is a warning that we might be in trouble on a short postion. Sometimes, stocks do close back above breakdowns for a day, or a few days, but we've been warned if that occurs, so take that under advisement.

2. A move, and especially a CLOSE, back above the high of a Right Shoulder (in this case, 41.96), is another BIG warning that we might be in trouble on a short postion.

This chart looked so lousy back on July 10, I put it on the back burner and didn't follow it, but you'll see in the next chart why I would like to have a staff of elves who DO follow these things ;)

Are you saying, "Get OUTTA here with that!" like I did, when I looked at this chart on Wednesday morning, before AGU reported earnings? LOL. (It helped me to play the long side of POT, though).

Where did Ms. Market tell that shorts that they probably were in trouble?

1. July 16 was a CLOSE back above the putative neckline of the second H&S Top. Uh-oh...

2. The neck session, July 17, was a PRINT above the 41.96 high of the putative second Right Shoulder. It wasn't a CLOSE above it, but the 41.99 high established a nearly perfectly flat neckline for a BULLISH Inverse H&S! Uh-oh...

3. The next three sessions, AGU traded sideways-to-down, and the 55/89 RSIs went into Bullish Synchronicity on July 22. A print above that day's high of 40.65 (so, 40.66) was a Buy Signal from that particular indicator. As analysts, we have to decide if we want to take the signal, based on what the chart looks like. Oh, Boy! A BUY SIGNAL, coming out of a Right Shoulder of a Bullish Inverse H&S? Yum ... Yum ... Yum... LOL.

4. July 23, not only did the 40.66 Buy Signal get printed, AGU also broke out above the 41.96 - 41.99 neckline on a strong white candle. Shorts who didn't Buy to Cover on any of the "warnings" that we just looked at were in BIG trouble as AGU raced higher on breakout buying, and they were forced to Buy to Cover, or face the consequences, and we can see what consequences were involved if the were stubborn about covering! The 48.47 Bullish Inverse H&S target got MADE in only seven sessions. UGH.

If we go back and look at the first two charts and had made a prediction about the next move in AGU, my guess is that the majority of us would have said BEARISH, and I would have been one of the folks who would have predicted that! LOL. I'm serious, though. AGU looked terrible back on July 10, and I would have predicted down.

This is a great illustration of why it's so important to FOLLOW what Ms. Market tells us to do. It would have been perfectly justifiable to short AGU when it retested that second neckline, but take the loss as early as possible when Ms. Market tells us that we've got it wrong. Being stubborn about it turns small losses into big ones. If the warnings that we got along the way weren't enough for us to cover any short, the takeout of that 41.96 - 41.99 neckline sure looked like "Die if you want to...die if you MUST" for the shorts. UGH.

At its Bear Market low of 22.08 on December 5, the bad news was factored in. Mid-December was when we discussed the "sea change" in the market, when Goldman and Morgan broke out to the UPSIDE on absolutely horrible earings. We looked at "Bad News Is Good News" in a number of posts.

The market is a discounting mechanism that is said to discount roughly 6-9 months out, and 8 months after the Bear Market low in AGU, we found out on the morning of August 5 that the company had its second best quarter ever. Interesting, given how bleak things looked back in December, huh?!