Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

9.2. 1999–2000

Observant readers will notice that the chart of Qualcomm (QCOM) in 1999 which is shown at the beginning of the previous chapter (Figure 8.1) is also similar to the examples of Peoplesoft and Charles Schwab in Figures 9.10 and 9.11. Amazon.com (AMZN) in 2009 also had a similar Rule of Three type of set-up, as Figure 9.12 shows. Two prior breakouts within a "macro-base" that is actually trending upwards very slightly both fail before the third breakout from a cup-with-handle base works. Again, the crowd is conditioned to believe the stock will not succeed on the breakout by the third time, and the crowd, as is often the case at turning points, is fooled. Once AMZN cleared the top of the cup-with-handle base it formed in late September 2009 it never violated its 10-week (50-day) moving average before launching up through the 100 price level into all-time price ground.

In any case, the precedent of Peoplesoft in 1994 was helpful in discerning these jagged bases, and stocks like America Online (AOL) and Charles Schwab (SCHW) were rocketing higher. On March 16, 1999, we put out a price target on Schwab based on some similar historical examples as well as some simple price target analysis based on earnings growth, forward earnings estimates and any potential P/E expansions in Schwab. At the time Schwab was trading at a split-adjusted $90 a share, and O'Neil was looking for a $140 price target on the upside. Most of the institutional sales force was incredulous, thinking ...