Weekly charts widen the parameters of a technical formation and consequently allow a trading strategy based on a particular pattern more time to play out. This is an advantage to traders who often find themselves whipsawed out of positions only to see original the premise of pattern come to fruition.
The four stocks highlighted here are testing the resistance levels of well-defined weekly chart patterns with price projections that target strong gains. The cup and handle formation is one of the more reliable technical patterns. It consists of a rounded bottom that establishes a rim line resistance level, as well as a pullback that is followed by a second rounded move higher and then returns to retest resistance.
The targeted price projection is measured by adding the depth of the cup to the breakout level. Obviously, the greater the height of the pattern, the greater the potential profit.
Allegheny Technologies
Shares of the specialty metals manufacturer Allegheny Technologies ( ATI - Get Report) have been forming a cup and handle pattern on the weekly chart for the last year, under an $18.50 rim line resistance level. The relative strength index has crossed above its 21-period average and center line; the vortex indicator, which is designed to identify early shifts in trend, is making a bullish crossover; and money flow has been positive since the pattern low, suggesting the stock is under accumulation.
A breakout projects a pattern price target that takes the stock price to the $30 area, which would be a 62% Fibonacci retracement of the 2014 highs and the 2016 low.

Beazer Homes
Home builder Beazer Homes ( BZH - Get Report) has fashioned a rudimentary cup and handle pattern this year below a $10 rim line. Moving average convergence/divergence has made a bullish crossover and is tracking higher, and the aroon indicator, another trend change indicator, has also made a bullish crossover, complimentary signs of positive price and trend momentum, while on the money flow side, the accumulation has definitively taken out its 21-period signal average to the upside.
A pattern breakout projects a 38% retracement of the 2014 and 2016 range.

Cemex ( CX - Get Report) , a Mexico-based concrete and cement manufacturer, has spent the last year building a cup and handle base under resistance in the $7.50 area. The 10-week (50-day) moving average made a "golden" cross above the 40-week (200-day) moving average just before the handle portion of the pattern formed, and the relative strength index and moving average convergence/divergence both moved over their center lines. Chaikin money flow is well into positive territory, reflecting strong buying interest in the stock.
A rim line breakout projects a price target in the $11 area.

Leucadia National
The final chart is Leucadia National ( LUK)  a diversified holding company that is often referred to as a mini-Berkshire Hathaway, has been forming its cup and handle base for the last 10 months, with pattern resistance in the $10 area. The price momentum indicators are moving steadily higher, the vortex indicator made a positive crossover, and a confirmed breakout could potentially take the stock price back up to the $22 level.
The initial stop loss level for the cup and handle pattern is usually positioned under the handle. The weekly ranges require a deeper stop, so positions sizes need to be adjusted to stay within the loss parameters of individual trading plans.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.