Dendreon Corp (DNDN)

We’ve previously profiled this stock.

We attempted an early “Shakeout Plus 3” entry from the double bottom base and got, well, shaken out!

But the pattern has held up and only become more compelling. The argument can be made that there isn’t any aggressive accumulation in the base, but neither is there distribution. Bear in mind the stock ran from under $3 and has seen the number of mutual funds holding it vault from 43 to 106 in just one calendar quarter. The orderly low volume move sideways is bullish enough for us.

And the daily shows a high volume bounce off the second bottom and a close that day in the upper half of its range. Clearly the break of support only brought in those on the sidelines hoping to get in at any kind of a discount.

The base is now a 14 week double bottom with handle, and the handle is bullishly three weeks tight, meaning that it has closed virtually unchanged on the weekly chart for three consecutive weeks. O’Neil argues that handles should trend lower, insuring a shake out of weak holders. He claims that handles that go sideways or wedge higher are faulty. By definition a three weeks tight handle would seem to violate O’Neil’s rule. But the daily shows the handle trending lower, indicating that it provided the required shake out.

The trend line connecting the June and August highs will be somewhere below $25 during Monday’s trading. We’d be buyers of any high volume move over this line, enabling slightly earlier entry than a break over the highs of the handle at $25.10.