Hi Tommaso,
Please allow me to describe to you what a 'coil' is, since I believe I'm the trouble maker who began using that four letter word.
A coil pattern looks like a spring. The trading range begins to narrow so that you have a development of higher lows and lower highs. If that pattern would continue, the chart would flatline like an EEG of one who just died.
If this pattern develops on a spikedown after a major bull move, the coil is bearish. If this pattern develops on a spike up after a major bear move, the coil is bullish. The break out of the coil pattern is generally violent and stunning. These patterns are truly rare, but I see them almost everywhere these days in the NAZDAQ companys.
If you look at the NAZDAQ chart, you will see that after many months of a rally, the market spiked down. That was the beginning of the coil pattern. Over the past several weeks, months, the trading range narrowed and stayed within that spike range. It's as if the market cannot make up its mind which way to go.
There are generally five pivot points to the coil, the spike being the first pivot. The more pivot points you have, the tighter the coil. The tighter the coil, like a tightly coiled spring, the prices jump out of that pattern with that much greater vengeance.
I hope that defines a coil for you. If anything I've just explained is not clear, please let me know.
GZ |
