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Cramer Bio
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Cramer Catch Phrases
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Mad Man Of Wall Street
Taking Stock Of Cramer
Most Common Mistakes
Break out Trading
Trend Timing
Momentum Trades
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Surviving Bear Markets
The Big W
20 golden rules
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Cutting Loses
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Greed and Fear
Gap Strategies
Gap Primer
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Jim Cramer's Real Money: Sane Investing in an Insane World
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The Big W
| Double Bottoms provide
visual reference points that map the entire reversal
process. Once located, these signposts
identify most key price pivots and flash early warning
signals when violated. The most common of these, The Big
W, begins at the last major high printed by a
downtrending stock, just prior to the first bottom. The
first bounce after this low creates the center of the W
as it retraces between 38% and 62% of that last downward
move.
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This rally fades and price
descends back toward a test of the last bottom low.
At this moment the trader listens closely for the first
bell to ring. A wide range reversal bar (doji or hammer)
may appear close to the low price of the last bottom. Or
volume spikes sharply but price does not fail. Better
yet, a Turtle Reversal develops where price violates the
last low by a few ticks and then prints a sharp move
back above support. Should any or all of these events
occur, we mark the potential second leg on our Big W.
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| Trade entry can be initiated
aggressively near the bottom of the second leg if the
bells ring loudly. The top of the shorter
move marking the partial retracement of the last
downward impulse (middle of the W) now becomes our main
pivot price for analysis and further trade entry. For
price to successfully return to this point, it must
retrace 100% of the last fall (from the second low).
This finally breaks the lower high, lower low bear
cycle. In strong DBs, price will quickly surge to this
price right off the second bottom.
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A less aggressive long
position can be entered when this new impulse retraces
strongly through 62% of the fall into the second low.
However, if a short-term exit is desired, sufficient
profit potential must exist between the entry and the
pivot price for this trade to make sense. Longer-term
traders can hold positions as price mounts this pivot.
At this point, it will often pause to test support.
However, another upward leg is then expected.
Price returning to the
height of the middle of the Big W has a very high
probability of surging beyond this point.
Under normal conditions, it can easily retrace 100% of
the original downward impulse, completing both the DB
and Big W patterns. This tendency allows for further
entry at the expected return test to the pivot point
after the second surge has begun. The TIG chart provides
an excellent example of this second chance opportunity.
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| In 1996,
property-casualty carrier TIG Holdings charted a
double bottom volatility ride uncommon in
insurance stocks. As price emerged from a small
but powerful Turtle Reversal, it faithfully
completed a classic double bottom variation: the
outline of the letter W. |
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