Hi Preston,
Cliffs broke through the bearish resistance line (BRL) from the
11/97 $82 top at $54 and went as high as $57 before heading south. On it's southbound trip, the stock paused at the BRL at $52 and reversed back up to $55. As you know, a penetrated BRL can be viewed as minor support if a stock reverses gears as CDG did in this case. Anyway, that long term BRL was rendered invalid after CDG broke through rather decisively to the upside. I've drawn in another BRL from the new high of $57 and that's my new guide. The subsequent usefulness of the original BRL has been a subject of discussion between Jan, Eric, and myself during your absence from the thread. I e-mailed Tom about the subject and this is what he said:
"Once a bearish resistance line is broken it no longer is
used. It is wiped out, and should be so your eyes don't pick up the wrong signals, and the bullish support lines are drawn in. Because the stock then gave a sell signal, it is within the confines of trading above the long term bullish support line. This line is all that is important now. Back to the original question. When a trend line is taken out you erase it and draw in the next appropriate one. In this case it was to draw in the bullish support line. This is your guide now. Tom"
That original BRL, according to Tom, while noteworthy, and quite possibly a factor, no longer officially exists. The new guides are now the BSL at $42, and the new BRL now at $54.
As far as the RS number from last week, in my latest Chartcraft newsletter the RS number is 5.11. After reading your post I divided CDG's stock price by the Dow and I came up with a rounded 4.8, not quite the 4.75 needed for the 3 box RS reversal. Your conclusion that a RS column reversal could lead to a violation of the BSL is a good one. Certainly something to keep an eye on.
Take care, Preston.
Bruce |
