CHART'N THE DOW -- AA & DIS
If you've watched Bollinger Bands, you know how the price bars (or candles) tend to bounce of the bands (both top and bottom). The same is true with the first, second, and even the third Bullish Resistance Line (brl). The brl's should be drawn in with all your hand charts. They also help to establish potential points of trend line S&R.
Two recent examples of Dow stocks hitting their brl and turning back are AA and DIS.
Here's a bit of DIS
45
44
43 * < "Unofficial" Bearish Resistance Line
42 X *
41 X O *
40 X O X *
39 X O X O * + < 2nd brl
38 X O X O * X
37 X O X O * + X O
36 X O X O * + X O
35 O O + * X O
34 O + * X
33 O + X X + < 1st brl
32 O + X O X
31 O X X O X + < Short Term Uptrend Line
30 O X O X O +
29 O X O + X +
28 O X O + X
27 O X O X X
26 O O X O X
25 O X O X + < "Official" Bullish Support Line
24 O O X +
23 O +
22 +
21 +
20 +
From a high of 41 on 4/23/98 to a bottom of 23 on 10/9/98, you can see that the "Unofficial" Bearish Resistance Line (BRL) was in control of this chart until it was taken out at 34. The first brl started at 28 and the second one at 32. Notice how the chart reached 38 on 1/12/99 and was turned back. You can see the trend line support as well as previous horizontal support. Assuming the market does nothing out of the ordinary, what do you think will happen Bruce, Chartseer, Al -- anyone?
Here's AA
92
91 + < 3rd brl
90 X
89 + X O
88 + X O
87 + X O
86 + X O + < 2nd brl
85 + X O
84 + X O
83 + + X O
82 + + X O
81 + X * + X O
80 + X O X X * X + < 1st brl
79 + X X O X O X O * X +
78 + X O X O X O X O * X
77 + X O X O X O O + X
76 + X O X O X O + X
75 + X O X O O X X
74 + X X O X O X O X
73 + X O X O O X O X
72 + X O X + O O X + < BSL
71 + X X O X + O X +
70 X O X O X + O +
69 X O X O X + +
68 O X X O X O +
67 O + X O X O +
66 O + X O X +
65 O X X O +
64 O X O X +
63 O X O X +
62 O X O +
61 O X +
60 O X +
59 O X +
58 O + < True penetation of the Bullish Support Line @ 73
57 +
56
55
At 90 AA is way up in the red zone. It reached 89 back on 7/30/97, so this is its high range. If it drops to 79 it will establish a high pole - and that can result in a subsequent sell signal. What a nice trending P&F chart AA has been since its low of 58. From its recent bottom of 70 it had one heck of a 20 box run up to 90, passing through the 1st and 2nd brl but -- the 3rd brl stopped it and may prove to be its upper range for a while. However, we can draw in a 4th and 5th if it turns back up. It did close at 86 on Friday.
What's your call here fellow P&Fers, lurkers, Elvis?
Take care,
Eric |
