GTAX - Gilman & Ciocia, Inc. Message Board

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Non-Tech : GTAX - Gilman & Ciocia, Inc.

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To: bdog who wrote (55)	1/4/1998 7:32:00 PM
From: Doug R	Read Replies (3) of 184

bdog, As far as any divergent warning signs go, they can usually only be taken as no more than possibilities until confirmation. That's why I use 12 to 15 different indicators each over several different parameters. I recognize the importance of divergence but you have to bear in mind that a divergent comparison today can soon give way to a move in which previous technical highs are surpassed. That is why I typically revert to trendline signals for making sell decisions. In the MACD, most stocks make a very large peak on the initial move that is never surpassed even as the stock continues higher. It is more the direction of the MACD rather than the absolute value that carries the momentum forward as long as key trendline support is maintained. Stochastics and RSI divergence are much more valid in the use of divergence/convergence as flagging possible turns in price movement. The double top situation is also not a signal to panic but is best used as a measuring tool for stoploss prices and price projection on breakouts from the formation. For a stoploss, the double top would become a failure if the price dipped below the low established between the two tops which is 6 1/2 (some people give it 5% below that). For breakout measurement, the distance from the low to the top would be added to the breakout price for a short-term run to 10 - 10 1/2. The formation of the entire chart as I see it so far is a breakout from a cup with handle on significant volume that is now retesting the breakout. Since a cup with handle is actually a long-term double top in the first place, the recent breakout lends weight to the bullish side of the outlook. Since most breakouts develop a retest this is a critical time to be sure. Such is the nature of the hunt. Doug R

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