Good morning Eric,
In my experience, I've found the low pole formation to have pretty good results when the NYSEBP is in a bullish mode. As for when the NYSEBP is bearish, like other bullish patterns, it's highly unreliable. The HPT on the other hand is extremely lethal when the NYSEBP is bearish and I can't emphasize this point strongly enough.
I've written about Herman Miller (MLHR) on this thread before and MLHR's Chartcraft chart illustrates my point on both patterns in bullish and bearish markets. In May '97, MLHR had a low pole at $17. The stock was above it's BSL and had bullish RS. Earnings estimates were rising and things looked good. This was the buy point. In June, MLHR gave a spread triple top buy at $19 1/2. A Bullish Catapult formed shortly thereafter at in July at $21 and the stock eventually reached a high of $36. Ahhh, those were the days.....Anyway, at the time, the NYSEBP was Bull Confirmed coming off a Bull Correction market in April. The low pole indicated an end to a fairly steep 26% correction and had signaled that the relationship between supply and demand had swung over to the demand side once again. The low pole worked like a charm.
MLHR had a High Pole Top in May at $27. The NYSEBP just turned bearish that same month with the reversal from 72% into Bear Alert status. MLHR's RS chart reversed into a down column. The HPT led to a sell as could be expected and the stock dropped to $22....a 39% drop. The HPT signaled a bearish change in the relationship between supply and demand.
MLHR had another low pole formation at $26 in July. The market background was different this time, however. THE NYSEBP was now in Bear Confirmed status and was telling those who were willing to listen that the investment landscape was about as unfriendly as it's been this decade. The stock was able to give a half hearted double top buy at $30 before pulling back immediately. The stock is $21 today.
A bearish NYSEBP is an equal opportunity destroyer of all trend lines, the biggies and the secondary trend lines. I can't believe how many great stocks have seen their long term BSL's broken in this market. I've mentioned EMC recently and that stock had it's BSL dating back to 7/96 at $8 broken WHILE IT'S P&F RS VALUE WAS RISING. So to answer your question, Eric, a bearish NYSEBP steamrolls mostly everything in it's path and calls into question bullish chart patterns that might form. It seals the fate of stocks with bearish patterns, especially those that have HPT's.
Take care, Big E.
Bruce
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