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Technology Stocks : THQ,Inc. (THQI)
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To: dweb who wrote (11757)10/10/1999 10:00:00 PM
From: Dennis K. Showers  Read Replies (1) of 14266
 
I agree with the assessment of the article. It seems to me that we are in a "Consolidation Rectangle" as described in 'Technical Analysis of
Stock Trends" by Tobert D. Edwards and John Magee. They say "A Rectangle consists of a series of sidewise price fluctuations-a trading area, as it is sometimes called-which can be bounded both top and bottom by horizontal lines. a Rectangle defines a contest between two groups of approximately equal strength-between owners of the stock who wish to dispose of their shares at a certain price and others who wish to accumulate the stock at a certain lower figure. They bat the ball back and forth (up and down, that is) between them until ultimately and usually quite suddenly, one team is exhausted (or changes its mind) and the other then proceeds to knock the ball out of the lot. Nobody (often, not even the contestants themselves) can tell who is going to win until one line or the other is decisively broken."

Some of the things that we should look for are:
1. A decrease in volume as the rectangle lengthens
2. A breakout to the upside should be accompanied high volume while a breakout to the downside may not show much of an initial volume increase.
3. When we breakout we should return and test the boundary line for either support of resistance. That return should take place between three days and three weeks after the breakout.
4. False breakouts are not all that common.
5. Rectangles tend to be more of a consolidation period rather than a reversal pattern. If they are a reversal pattern it is most likely to be at the bottom than at the top.

I have two rectangles drawn on my chart. Both have support at the high reached on 9/20 at 41.0625. The top of the narrower rectangle is at our closing high, 43.875 and the other at the high of 45. I chose to use the second as my primary line.

If you refer to my last post (around two weeks ago) note that my long term resistance line that is now our support line has still held and is currently just above the support line of the two rectangles. If it holds our lows should begin to get higher.

I am still hopeful that the senerio that I described in my previous post is still being set up. That is, that we may be in the first stages of a breakaway which will move us to much higher levels. However, I also am watching what may be the development of a double top at 45. Both times that we touched 45 we set up bearish candlestick formations. The first was the piercing pattern and the second was the shooting star followed by the bearish engulfing pattern set Friday. Let's hope 41 holds.

Whitetail
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