Both Dow and S&P gained about 3% yesterday and put the indices well above the neckline. Both the head and shoulders patterns have failed as shown. A single candlestick can kill the whole pattern that takes weeks to develop. No chart is infallible (Mulphy)
With this latest development, without the head and shoukders formation, the chart for Dow has limited downside risk. Out of many possible chart formations, two most likely outcomes are as shown below.
Possibility 1 is a sideway flat A-B-C formation for major wave (II) with possible low for C at point A level as shown, not very damaging. If point B moves higher, then the (II) is a running ABC whereby point C will stay higher than point A.
Possibility 2 is a more bullish version with major wave (II) already completed, Dow is at the begining of the major wave (III) which is always very dynamic in nature with mass participation and volume should be in the region of 9 to 10 billions, at least should be higher than that of wave (I).
Personally I feel that the current run up with low volume is more like a wave B (possibility 1), if so, wave C is the last chance to buy.
With this latest development, without the head and shoukders formation, the chart for Dow has limited downside risk. Out of many possible chart formations, two most likely outcomes are as shown below.
Possibility 1 is a sideway flat A-B-C formation for major wave (II) with possible low for C at point A level as shown, not very damaging. If point B moves higher, then the (II) is a running ABC whereby point C will stay higher than point A.
Possibility 2 is a more bullish version with major wave (II) already completed, Dow is at the begining of the major wave (III) which is always very dynamic in nature with mass participation and volume should be in the region of 9 to 10 billions, at least should be higher than that of wave (I).Personally I feel that the current run up with low volume is more like a wave B (possibility 1), if so, wave C is the last chance to buy.
No comments:
Post a Comment