Perfect Storm Formation ZT

A perfect storm is the same as a 3 lane highway but you have pups and mini pups on 3 or more time frames. A pup formation forms after a stock has broken out and exhausted back to the 5-period moving average. It may overshoot to the 15-period moving average and form a hammer and then stalls. During this stalling process, the stock hovers near that 5-period moving average while the 15 period moving average slowly rises. The 5-period is where the bears are sitting and the 15-period represents the bulls. As the 15-period rises, the channel starts to get tighter and tighter like a compression building up steam until the bears get squeezed as the stock breaks back above the 5 period moving average causing an explosive breakout and resuming the uptrend to new highs. The same happens on an inverse pup breakdown as it applies to downtrends. This pattern can also happen with the stochastics using the lead stochastics %d and the laggard % dslow. We call these "mini pups" and they are very powerful. The beauty of pups and mini pups is that they are pullbacks that suck in the countertrend players only to squeeze them higher on breakouts and panic them out lower on breakdowns.