Kb, Augie:
I'd like to jump back in here for a moment, partly because I have a question relating to Augie's chart.
I wrote, not realizing at the time that it could be ambiguous (and was in fact erroneous):
<<d) the October low already completed the pattern.>>
what I meant was that the total H&S decline has now ended, and the market is, as you say, <<onto other areas and patterns>>.
I subsequently went back to my E&M (p.64), and was reminded that the pattern is fourfold: LS + H + RS + "the neckline has been penetrated downside by a decisive margin" (p.69). That is the completion of the pattern, even if it wasn't what I meant.
I have always understood a H&S is normally expected to fall some 50% ("measurement rule"), before price can go <<onto other areas and patterns>>, presumably in some upward fashion. E&M mentions 50% as the minimum probable objective of the decline.
What interested me is that Augie's chart, derived from Bulkowski (which I have not read), mentions a most likely decline of 20%. The average decline is 27%.
Does that not directly contradict E&M? Do you have any further details on this?
If Bulkowski is right, I also wonder how this works statistically (I'm now beyond semantics -g-). If these percentages are true, would <<most likely>> not correlate with a higher proportion of the lows set in a H&S? A smaller absolute number of H&S would fall 50% and beyond, therefore lowering the mean. It implies to me that one would should normally expect declines of only 20% to 27%, with 50% being the exception that skews the average.
Lastly, to get back to my original question, if the most likely drop is implied to end at 720 and given that the October lows ended at 708, one could make a bullish case that the H&S pretty much fulfilled its measurement implications in October. Well, close enough for government work, to put it colloquially <g>.
Augie, does that make sense to you? I know it's a little tedious, but it's not going to be the last H&S formation we'll be seeing by a long shot, so it does pay to understand the ramifications.
PVZ |
