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Hot Stock Update – PMDP Bullish Technical Pattern

Posted on November 8, 2009 by Penny Stocks Picker

PMDP is still my #1 penny stock to watch based on a bullish technical chart pattern.  I’m hearing rumors that the chart is now in a downtrend.  I’d like to argue that this is clearly not the case based on my interpretation.  I believe the chart shows PMDP is still in an uptrend with a valid upside breakout from a technical continuation pattern.  In my opinion the uptrend is still in force marked with a period of consolidation defining the symmetrical triangle (continuation) pattern.  Below I provide some of the criteria required for defining the pattern and breakout as well as annotating the chart with this evidence.  Refer to the chart at the bottom of the page.

Basic requirements for the symmetrical triangle pattern:

• To form a trend line at least 2 price points are needed and two trend lines are needed to form the pattern.  The upper line slopes down (with at least two lower highs) and the lower line (with at least two higher lows) slopes up (uptrend) and should extend for at least 3 weeks.  The pattern trend lines marked in blue are shown below.
• As the pattern develops the trading range should tighten (area between the trend lines narrows over time) with declining volume (shown in light green).

Upside breakout is a good indicator of future price direction (not always):

• Ideal breakouts occur about 1/2 to 3/4 of the way through the development of the completed pattern.  Where the two trendlines meet is the apex of the completed triangle. 
• A valid breakout occurs when the price closes above the breakout point and should do so with an increase in volume.  The chart clearly shows the breakout point at .0014 occurred 3/4 of the way through the pattern (in dark green) and closed at .0020 on 11/5/09 with breakout volume, meeting both these requirements. 
• After a valid upside breakout, prices can return to the upper trend line and/or apex (support zone) of the triangle (which looks like ~.0013ish) before continuing in the breakout direction.  On 11/6/09 the price pulled back and bounced off the upper trend line (shown in Red).  The pull back can offer traders or investors a second chance to enter into a trade with lower risk. 

At this time it is my opinion that the current chart clearly shows PMDP confirmed a valid upside breakout from a symmetrical triangle continuation pattern and is still in an uptrend.  The upside breakout may signal a continuation of the current uptrend.  Call me a fool but I could not resist the pullback Friday and added more shares to my position.  Current support zones at .0014, .0013 and the lower trend line (currently .0011).  Please feel free to post your comments.