CRUS: What The Heck Happened?

(Click on chart to enlarge, then click on it again for further enlargement. Use left arrow to return to the narrative).

Sadly, when market participants ask that question, it usually is only a rhetorical question. They generally aren't wanting to know the particulars of what actually did happen, nor are they wanting to learn anything so that they can avoid making the same mistake again. What they really are asking is, "Am I going to get my money back? When? Will somebody please just TELL me that?" They want palliatives like, "Don't worry. This stock is going MUCH higher!"

Charts don't always give us a clear picture of what is happening. Sometimes charts are erratic, with up and down moves that are very difficult to understand, in which case I think that they are best avoided. Others, like CRUS, do give us a clearer picture of what is happening.

RISING WEDGE:

On March 7, CRUS broke down below the lower trendline of a Bearish Rising Wedge, at 23.81, putting a downside target of 19.83 IN PLAY. That breakdown also set up the potential for a Double Top, with the highs at 25.48 and 25.18. The pivot for the Double Top, or "M"-Top (it looks like the letter "M") was the February 23 low of 21.17.

DOUBLE TOP:

The Double Top got put in on March 10, when the 21.17 pivot got taken down. That put a downside target of 17.16 IN PLAY.

Math For The Double Top:

25.18 - High (I always use the more conservative of the two tops (25.48 & 25.18)
21.17 - Low of the Double Top pattern

25.18 - 21.17 = 4.01 points of downside on a break below 21.17

21.17 - 4.01 = Target: 17.16 IN PLAY

After the Double Top was put in, CRUS managed a one day rally back above 21.17, known as a "One Day Wonder," but that failed and the Rising Wedge target of 19.83 got MADE on March 18 at the bottom (Green #3) of what later became a Falling Wedge.

FALLING WEDGE:

As I've said many times, Falling Wedge breakouts are my least favorite bullish pattern because there is immediate price resistance within, and all the way to the top of, the Falling Wedge, and depending where the Falling Wedge occurs in the chart, there often is additional nearby overhead resistance, as was the case on the Falling Wedge Breakout in CRUS.

CRUS broke out of the Rising Wedge on March 24 and even successfully retested the top of the Wedge intraday, but it was heading straight into IMMEDIATE resistance from the Double Top: 21.17 on up to 25.48. There was an "overhang of sellers" who were trapped in the Double Top, and who wanted out of the stock on any rally above 21.17.

ROLL OVER AND DIE:

I don't think there's a technical term for when a stock breaks out to the upside, then rolls over and takes out the low of the pattern (19.51 in this case, at Green #3) then continues down...down...down, so I've dubbed it the "Roll Over And Die."

On the technical upside breakout of the Falling Wedge, some players will use "the last low" before the breakout as their stop, which was 19.82. Others will use the low of the pattern, 19.51, as their stop. That's an individual choice and either stop is perfectly fine, as long as we do use a stop loss!

BLIND-SIDED:

When CRUS came out with bad news regarding margins on April 15, shareholders got taken by surprise. From both a fundamental and technical standpoint, there simply is no way to predict these "out of the blue" events and it's terribly disappointing if we're long when news like that comes out.

But, anyone FOLLOWING the technical breakdowns had plenty of advance warning prior to the April 15 gap down to 16.94 that the stock had problems and they had a number of opportunites to get out of the stock and buy it back at much cheaper prices if they really liked the fundamentals:

23.84 - Rising Wedge breakdown on March 7
21.17 - Double Top breakdown on March 10
19.51 - the second takeout of, and CLOSE below the Falling Wedge, on April 8

SHAMELESS PUMPING (My subjective opinion)

When CRUS tanked to a low of 15.63 on April 15, at least two analysts that I know of got behind the stock and pumped it and table-pounded so hard, I think they left a few pompoms on the floor before they left for the day. Sheesh...

They pumped the stock so hard, CRUS finished the session on a VERY bullish-looking hammer. If all of that pumping had produced a Gap Up in the next session, we would have been looking at Bullish Island Reversal possibilites, ala the November 22, 2009VERY Bullish Island Reversal out of a Symmetrical Triangle pattern (the blue pattern at the lower left of the chart).

As we can see, though, the pumping only had a short-term effect. CRUS took out the 15.63 low of the bullish-looking hammer in the next session. Yesterday, CRUS put in another bullish-looking Doji Star Hammer, finishing out the session at 15.63. That candlestick "could" produce a rally, but CRUS now has four months worth of nearby overhead resistance and some repair work to do.

Summary: That's "what the heck happened," to date ;)