Dow - ready to break the upper trend line?

When you are riding on a small bull it is always good to watch out for the big bear at the back.

Refer to my previous post on September 10, at that time Nasdaq has already broken its upper trend line, S&P has just reached the trend line and Dow was moving towards the line. After taking a short pause on Friday September 11, the three indices continued to move higher.

Nasdaq has moved further away from the resistance line without any hesitation.

S&P was able to punch through the upper resistance level at the close of Wednesday's session

Dow has finally reached the upper resistance line. It's just a matter of time before it breaks the resistance. At this juncture, the major wave B scenario can be put aside for a while. Assuming Dow is going to follow the footsteps of Nasdaq and S&P, let's look at the likely chart patterns for Nasdaq.

After completing its major wave (II) in early July, the first possible wave count is as shown above. Nasdaq is currently in sub-wave iii of wave 3.

Another possible wave count is as shown above, Nasdaq has completed a-b-c wave 2 and is currently in wave 3. The magnitude of next consolidation will determine which is the right count.

Chart Reading

Chart analysts believe that :
(1) Chart pattern reflects everything that has or could affect the price movement. things that include economy, politic, government policies, market psychology, GDP, interest rate, currency movement, commodities, company business, etc.
(2) Chart pattern tends to repeat itself - market participants tend to act and react to events in a similar way consistently over time - past, present and future.












These books separately cover topics on chart pattern (head and shoulders, double tops, etc.) trend line, indicators, oscillator, volume, candlesticks pattern (Doji, shooting star,etc.), wave count, fibonacci ratio ..........etc.

With these tools, chart technicians try to identify possible chart patterns and attempt to project possible future price movement.

On hindsight it is usually easy to pinpoint chart patterns that have already formed and to point out the subsequent movements such as the KLCI chart as shown below.





But in real time it is very difficult and uncertain to determine the next price movement. There are always several possible outcomes. That is why several chart analysts using the same tools can have different outcomes over the same chart. It has to be that way for the market to exist. That is also why there are always bullish buyers and bearish sellers for the same stock at the same time to complete a transaction.

In early July we have this failed head and shoulders for Dow as shown below. A pattern can fail.


Those that have sold their stocks when 'head and shoulders' pattern was formed have to buy back their stocks within a week when Dow moved above the neckline.

Another example is the following stock. If the price starts to move up from its current position, it is an 'inverted head and shoulders'.

But if the price starts to drop lower from the current level to 44 cents and if it can move higher from the 44 cents level, it is a 'double bottoms' formation.

If it does not stop at 44 cents level and it continues to go lower, then it is something else.

If it is so difficult and uncertain in real time chart reading, why bother to spend times on it?

There are many reasons. The first reason is - you think you know what you are doing at that moment.

Dow remains below the upper trend line

Not much changes to Dow after the last few trading sessions. The index remains below the upper trend line. I am still not certain whether the rebound since March is a bear market wave B rebound as shown below. Most people think that this is unlikely. I also think that it is unlikely based on the currently economic situation but I prefer not to rule out this possibility at this moment until Dow has punched through the upper trend line.

If March's bottom is not wave A, then it is likely to be the end of the 17 months bear cycle. Under this possibility Dow may go for a sub-wave ii pull back as shown below. (very bullish)

Or Dow may go for a higher degree wave 4 pullback as shown below.

There is no indication from Dow so far on its major direction.

Steamed Fish Head

For those who love to eat fish head and without much concern about the ambiance, this food stall under the trees at Jalan Tiga Chan Sow Lin is the right place.


These are the two standard dishes that every table usually ordered. They are really delicious.

Jailed for life

Taiwan's Parliament is notorious for fighting.

Whatever you may say about the behaviour of their legislators but their ex-president and wife can be sentenced to life in jail by the court for corruption.

This can only be a fairly tale in the bolehland.

Priceworth and Kurnia Asia

I have discussed the chart pattern of Priceworth and Kurnia Asia two weeks ago in my previous post dated 25th August. It is interesting to see what has happened to these two stocks in the last two weeks.

Priceworth's chart as shown below has started to moved within a narrow range at around 60 sen level. A good starting point for the right shoulder.


If the price can move up from here and can proceed to break the neckline at 80 sen level, then it is an inverted head and shoulder formation. However if the price starts to move lower towards the double bottoms support line, then it is not an inverted head and shoulder formation, it is a 100% retracement for wave (II). A 100% retracement is usually a golden opportunity to move into a stock provided the world bourses especially Dow are still alive.

On 25th August when I talked about Kurnia Asia, it was the first day it started to move higher, away from the neckline after it has gone back to touch the neckline at 50 sen earlier. From 50 sen level on 24th August, it has moved all the way up to closed at 64 sen today for a 14 sen (28%) gain in the last 12 trading days. If sub-wave iii's magnitude equals to 1.618 times of that of sub-wave i, the immediate target for sub-wave iii can be 70 sen. After which there will be a sub-wave iv pullback to be followed by sub-wave v to complete the wave 3 possibly at around 85 sen. All the targeted prices are subjected to fine-tuning as the wave form slowly unfolds itself.

Can Dow break its upper trendline?

Dow closed its Thursday session with a gain of 80 points (+0.8%). This is the fifth gain for Dow. In 5 trading sessions, it managed to put on 347 points (3.7%) and moved closer to its upper trend line. Can it break its upper trend line?

The followings are the 3-month chart for Dow, S&P and Nasdaq. Nasdaq has already moved above its upper trend line, what about Dow and S&P? Take a guess.

Approaching

Touching

Breakout