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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (31166)	4/13/2000 1:18:00 PM
From: prosperous	Read Replies (1) of 50167

Iqbal its been great reading your comments on the market. I was recently looking at the Dow chart (DJI) and was a bit concerned by the so called "broadening top" formation on the chart (progessively higher highs and lower lows) beginning since Aug 1999. Edwards and McGee in their "technical Analysis" book discuss such a chart and their main conclusions are: -this is a very bearish pattern with a high probablility (.9) as compared to a H & S (to which they assign about .75 bearish probability) -this formation was very common in many stocks during the 1929 time frame and they indicate that it is typically formed in the final phase of the bull market reversal -the higher highs and lower lows are because of undecisiveness of the people at this stage who are rampantly flipping positions (like we hear about rotations these days between new and old economy stocks) -they also mention that although, in theory, this kind of pattern can be a "broadening bottom" which can break out on upside, they have never seen such formations in practice -We will not know until we break on either side -they advise people not to short until downside break is confirmed and by that time it can be too late but to be cautious and close long positions... My comments -DELL chart is also showing a similar pattern -I have in the past seen many charts making this formation break on the down side -if the downside break scenario were to play out it could go there either from current consolidation around 11K or after a vicious rally that would take us to a higher high beyond 12000 and play out over next 6 months, if we break down below from current level we could see around 8000, if we go over 12000 we could see lower -What is your opinion about this formation? does it concern you for Mid-term? or to rephrase, "do you have examples of sustained bullish breakouts to upside" from such chart formations? Thanks and best regards Hemant

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