Technical Analysis and Charting

Top 197. Jun 27, 1999 7:21 AM

» KirkL - Dan, I don't see a rectangle.

Dan, I don't see a rectangle. Can you give me the coordinates in time vs Value?

6 month chart of the DJIA.

I agree that 10,400 looks like strong support for a new trading range.

Remember I was talking about this at the beginning of the year when we were at a 9200 trading range and some thought we were going to start a correction every time it went down a few hundred points and I called for the market to go up saying we'd only correct if there was a catalyst.

YTD Chart of the DJIA.

Perhaps we will "meander" awhile here as we did at 9200 until we have the "earnings season" catalyst to go higher? Anyway, that is my belief. Of course I am hoping for a positive catalyst reflected by my owning equities for 78% of my investment portfolio!

Thanks

-- posted by KirkL

mailto:almamdgcorp@earthlink.net

Top 198. Jun 28, 1999 12:46 AM

» JenL_3 - DOW TA Chart

I subscribed to a free TA newsletter with charts from ALFA:

Here is the

6/27 Daily 1 YR DOW Chart

Here is some of the TA explanation from the newsletter:

The Daily Dow Chart (See 1-year Chart) still showing Bearish Outlook.

The Daily Graph points out Accumulation(10,917-Level Line) and Distribution (10,450-Level Line)Areas. The neck of the Distribution Area is 10,450 - a break through this level in a high volume is considered very Bearish, and it will trigger further Sell Off!

Remember the 10,725 level - the Critical Point! As long as we are below that point, we still can be exposed to a downside movement, down to 10,200-10,250...

Watch the trading day tomorrow: If we Open higher (above fair value) we most likely will sustain another Rally UP to 10,650+ area to re-test resent highs, and then, as forming a double top around that area, the Index should retrace down levels to confirm a new support at 10,550!

If we Open lower (below fair value) we most likely will re-test 38% main retracement level down at 10,478: But watch if we move further down through the 10,450 (a main support!) to settle at the important bottom 10,200-10,250 - which is also 25% retracement since the major bottom of 7,400 (11,200-7,400=3,800; 3,800 X 25%=950; 11,200-950=10,250!!!).

I will look 10,250 as a major bottom of the Dow! If we break it, 62% is the next support level, i.e. 10,022 - if we cannot hold 10,022 (I hope we will never going to get to this point), I will become a Bear!

So, we will experiencing interesting trading days in the beginning of July:
Be Prepared!

Good Luck to you!

Sincerely,
Milo Georgieff, MSCE, NALU Member

Dan or anyone - Any opinions on this newsletter?..…..Jen

-- posted by JenL_3

Top 199. Jun 28, 1999 6:07 AM

» KirkL - Great Chart Jen!

Thanks for putting that on your website! You can clearly see the old trading range between 9,000 and 9,500 and how it seems to be at another trading range between 10,400 and 11,100.

One bearish note, you could say that the chart looks like it has formed the left half of a head and shoulders formation between Oct 98 and today.

Not that I have any faith in charts for predicting the future, many people do use them and thus they sometimes can effect the market and come true. Especially for showing support and resistance levels. I still prefer fundamental analysis but it is good for a savvy investor to understand all investment techniques.

-- posted by KirkL

Top 200. Jun 28, 1999 7:32 AM

» DanG_6 - Rectangle

Kirk, look at the chart you posted. The Dow has been in a trading range for the entire month of June, bounded by 10900 and 10400 (approximately). Draw horizontal lines through both of those levels and you have a month long rectangle (at least in my eyes). Rectangles are periods of consolidation according to Magee, et al, and a breakout in either direction is significant--to a chartist, anyway. If the Dow were to breakout of this "rectangle", it should continue to move a MINIMUM number of points equal to the width of the rectangle, and possibly much more. That would be 10900-10400=500 points minimum in the direction of the breakout. Or so goes the "theory".
- Dan

-- posted by DanG_6

Top 201. Jun 28, 1999 7:41 AM

» RandeS - Dan,

Dan,

And a breakout on significant volume would be even better, eh? Should it be on the upside, that would take us to those new highs.

-- posted by RandeS

Top 202. Jun 28, 1999 7:47 AM

» KirkL - Thanks Dan

Now I see how to do it.... takes some practice!

It seems that you ignore the "overshoot" that control theory says happens (like when your car hits a pot hole) and look to the "trading range" that happens after (like the normal travel of your shocks while driving) to create the rectangle.

-- posted by KirkL

Top 203. Jun 28, 1999 9:57 AM

» dna2 - Technical vs Fundamentals

I've really enjoyed this discussion, especially since I have been reading A Random Walk Down Wallstreet. As you know the author thinks chartist are equivalent to astrologers when it comes to predicting any stock. However, when there basically are no fundamentals to go buy (very new companies with very little track record to see how they are bleeding) charts are what I have started to look at. Atleast for support and resistance levels. How bout you?

-- posted by dna2

Top 204. Jun 28, 1999 2:15 PM

» DanG_6 - Rande

That would be nice, Rande. And it would fulfill Bob Brinker's prediction of new highs. What worries me is what will we do for an encore? What will push stocks even higher, what with the Fed dragging its feet, with astronomical P/Es, etc. I hope something turns up, but whatever it turns out to be, it sure is eluding me now. If BB's model was ever going to find an excuse to issue a sell after (if) new highs are reached, this could be the time.
- Dan

-- posted by DanG_6

Top 205. Jun 28, 1999 2:32 PM

» RandeS - Dan,

Dan,

Yes, the be careful what you wish for syndrome. My hoped-for, and not unlikely, scenario is for the market to get past this week's FOMC and jobs numbers to post new highs as the earnings come forth. New highs will be only be sustainable, and surpassable, if we get concrete evidence of a visibly moderating economy accompanied by continued tame inflation. Interest rates MUST stabalize and come down in order for the bull market to remain robust. We shall see. In any event, new highs do indeed seem likely in short order, barring the proverbial "exogenous" event.

-- posted by RandeS