How to Find Stocks Which will Double Your Money

On September 22, 2008, In Stock Screens, Technical Analysis, by Steve Warshaw

Profitable trades are everywhere, and finding stocks which have the potential to double, triple, or even quadruple in value is definitely possible. Of course successfully making this kind of trade depends on your trading style, risk tolerance, and a plethra of other facctors. Options The fastest method of doubling your money in a stock is through option investing; a topic well beyond the scope of this particular post. However, if you are interested in learning how to trade options, OptionSmart has some great education and screening programs available Long Term Trades If you are a traditional "buy and hold investor", and your time frame is 1 to many years, then you can chose from many blue chip companies with good earnings accelaration (IE earnings growth is growing), and you’ll likely double your money Penny Stocks I don’t trade penny stocks, and if you’re a novice investor, you shouldn’t either. The attraction to penny stocks is is very strong because of the potential for massive profit. Doubling your investment money in penny stocks is quite possible, but the downside risk of losing most of your money is equal to the possible reward (and probably greater unless you have great experience trading them). If you’re going to trade penny stocks, I recommend completing at least 40 – 50 paper trades first. For the Rest OF Us There is one stock chart pattern that can consistently double your money, defined by William O’neil and his CAN-SLIM method, is the Cup With Handle Formation. CAN-SLIM is a growth based trading system and if you want to learn more about the method, head over to Investors.com

What Is a Cup With Handle?

The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. There are 7 signals you should use to verify a cup with handle:

Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. The more mature the trend, the less chance that the pattern marks a continuation or the less upside potential.
Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. A "V" shaped bottom would be considered too sharp of a reversal to qualify. The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U". The perfect pattern would have equal highs on both sides of the cup, but this is not always the case.
Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to 1/2. In extreme situations, the maximum retracement could be 2/3, which is conforms with Dow Theory.
Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward, other times just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup’s advance, but usually not more. The smaller the retracement is, the more bullish the formation and significant the breakout. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup.
Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks.
Volume: There should be a substantial increase in volume on the breakout above the handle’s resistance.
Target: The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.