China Auto Electronics Potential Cup Within Cup Formation

A potential cup within a cup pattern is forming on the weekly chart. A red cup and handle is about to be created. A similar small blue cup with handle pattern was confirmed with a breakout in the second week of Aug 2009. Price surged higher and higher every week until the last week of Aug 2009 when it ended with a weekly doji candlestick formation.

Since late Aug 2009 price has been trading within the falling wedge formation until this week when it broke out with increasing volume. Weekly stochastics has just crossover in the oversold region and RSI is trending higher after crossing the 50% mark last week. MACD bullish crossover is imminent. Immediate resistance is the red upper channel handle of the red big cup. Next resistance zone is the doji top at 19 cents to the psychological round number barrier at 20 cents.

A powerful breakout above the handle of the red cup will probably result in a similar upthrust as indicated by the light blue oval candlesticks formation. A consecutive weekly rise will challenge the 25 to 27 cents resistance zone.

This potential cup and handle formation needs to be confirmed with a breakout above the upper red channel and it will be invalid if price drops below the lower red channel.