In 1958, Texas Instruments stock was the No. 1 company in the new semiconductor field. It jumped out of a 36-week cup-with-handle base and ran from $30 to $258 — more than 750% — in slightly over two years.
Here's an undeviating principle that few investors fully appreciate or understand: 80% or more of all great new winning chart base patterns are created and formed due to corrections in the general market averages, usually in three waves down.
Once the market averages hit their low point and have a follow-through day confirming the new uptrend, opportunities abound.
If the correction was only a short-term intermediate move of, say, 6% to 12%, one or two of the new winners will break out the very week of the follow-through in the general market and begin their super run.
Not only that, the remaining 75% of the very best new big winners can move up and quickly complete the right side of their bases and break out in the next two, three or four weeks.
Texas Instruments Stock: Rising From A Bear Market
That doesn't give you much time to act. You're either ready, knowing what to look for and on top of the situation, or you're a little unsure and hesitate. The market isn't easy — it doesn't wait until everyone is ready, prepared and certain.
In the Texas Instruments stock example, the correction was due to a bear market or prolonged recession that ended with a 20% market dive in the final three months. In those cases, you might find many of the bases will be deeper and start moving up their right side over a larger number of weeks to complete deeper cup-with-handle stock charts every weekend, especially during all market corrections.
Changes in market direction can be sudden and offer life-changing opportunities to the well-prepared. Learn how to recognize all classic historical cup-with-handle patterns starting with those in 1958 along with Texas Instruments.
They include Zenith, which introduced a new TV remote control, and broke out at $25 on its way to $137. Also, American Motors came out with its new Rambler, and went from $10 to $97, Brunswick flew from a split-adjusted $4.60 to $76, and Xerox soared from $13 to $171.
This column originally ran in Investor's Business Daily as part of a 2012-14 series on America's greatest stock opportunities written by IBD's founder, the late William J. O'Neil. See more stories in this series.
