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William O'Neil Setups

Tuesday, December 13, 2011 14:26

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William O’Neil Setups

Historical precedent analysis is the cornerstone of William O’Neils effort.

Study what has worked in history and look for similar stocks+setups in today’s market.

O’Neil also detailed vehicle selection strategy. Which Livermore just alluded to.

O’Neil also added market timing to the setup idea and created detail guidelines for market timing.

William O’Neil setup: cup with handle

Most commonly found setup in stocks with momentum/growth

William O’Neil setup: cup with handle

For each element of the setup O’Neil has detailed guidelines. For example the first leg should be up at least 30%. During that period stock should have improved its relative strength v/s market and should have substantial volume increase during the move compared to its average 50 day volume.

If you read O’Neil book in detail , it will give you detailed guidelines for every element of a setup.

Dan Zanger has said it many times that he has read O’Neil book 100 times before he got every thing in it and he still continues to read it every few weeks.

I always buy 5 to 10 copies of O’Neil book when new edition comes in. Whenever some neighbor or some acquaintance approaches me asking for advice on market I give them a copy to read telling them this is very important book and my only copy. And tell them once you read it come back, and we can discuss. In the book you will find method which can make you lot of money. So far I have never got the book back from anyone of the people I game it to and most do not come back also.

William O’Neil setup: double bottom at top of the range

Double bottom near high is another commonly found setup in momentum/growth stock.

William O’Neil setup: flat base

This is nothing but Darvas box setup. But again O’Neil has added significant details to define it.

These are second stage bases (bases that form after a primary base such as the cup with handle). According to O’Neil a “flat base usually occurs after a stock has advanced 20% or more off a cup with handle pattern”. The ‘flat base’ moves straight sideways in a fairly tight price range for at least five weeks and does not correct more than 10% to 15%.

http://bit.ly/sYsw0k

William O’Neil setup: Square Box base

http://bit.ly/tOT6Gj

The square box base is a quick-gulp consolidation. It can be as short as four weeks. The flat base, by comparison, forms over a minimum of five weeks.

This was introduced by IBD in recent years.

William O’Neil setup: High, tight flags

High, tight flags are rare.

Some chart readers like them because they can be powerful.

The pattern has a flagpole, formed by a rapid advance. It has a flag, shaped by a modest correction.

It is formed when a stock surges about 100% to 120% in four to eight weeks. That’s the pole.

Then it corrects 10% to 20% in three to five weeks. That’s the flag.

The ideal buy point is the high of the pattern plus 10 cents.

Essentially yet another continuation pattern , Darvas box kind pattern in high momentum stocks.

http://bit.ly/rM5m06

Reproduced from the Stockbee members site. On the members site there is more extensive discussion on these setups and how to set them up in Telechart.

Related:

Learn the language of setups

Jesse Livermore and Setups

Jesse Livermore new high breakout setup

Livermore Round number Pivots Setup

Jesse Livermore IPO b/o setup

Jesse Livermore 3 point range breakdown failure setup

Invest in a setup idea….

Gary Kaltbaum setup

Read more at Stock Bee

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