Good morning, Jerry. CDWC has the Pole portion of the HPT pattern having run up 33 straight boxes on it's chart, however, the stock has to retreat to $60 to fulfill the requirements for a High Pole Top. The key word in the pattern is "Top" as I'll describe in a moment Traders will sell the first 3 box reversal off the top of a stock that has run up 20 or more boxes, so the reversal to $74 from $77 was a "Blumenthal 20 Box Sell Signal". If CDWC is to remain healthy on it's chart, it'll have a normal correction during this current move into a down column and will stay away from the nasty HPT at $60.
A HPT pattern occurs when a stock has a good upmove and exceeds the previous column of X's by at least 3 boxes. After the stock reverses into an O column, the stock then retraces 50%+ of the column of X's. A 50% retracement is not enough Chartcraft has found, it must be at least 1 box more than 50%. So in CDWC's case, since the stock has run up 33 straight boxes, a retreat in the very next column to $60 would be a 17 box retracement. The important underlying concept is that if a stock is going to give back over 1/2 of a great up move then there must be something wrong with the supply/demand relationship for the stock. These patterns are indicative of either short or long term tops in a stock. The stance of the NYSEBP and the stock's sector BP as well as the stock's own p&f chart will determine what happens next.
Chartcraft has found that HPT's lead to sell signals 80% of the time. In a market with a bullish NYSEBP, HPT's often act as warnings, not final tops. With a bearish NYSEBP, they cause devastation to a stock's p&f chart.
HPT's are also early warning patterns in that they clue the chartist to the supply/demand relationship for a stock before an actual sell signal is given. HPT's are unique in that way.
Best of luck to you.
Bruce |
