To: Michael Watkins who wrote (52 ) 2/12/2001 9:14:52 AM From: Paul Shread Read Replies (4) | Respond to You have to ignore three weeks of perfect price/volume action on the Nasdaq to call it a rising wedge: every up day occurred on rising volume, every down day on declining volume. Not the picture of a weak rally that a wedge would normally indicate, hence the importance of volume to any chart pattern. The first four days from where you draw that wedge was a rally on rising volume; you ignore that to portray the volume as declining. You don't draw it off the lows, where every other rally has formed wedges since May. You ignore that massive, record-volume white candlestick that marked the lows, except to use it to mark the top of the wedge -- you aren't marking the top of the pattern at the first reaction high after the point where you marked the bottom of the pattern. Had you begun the top of that wedge at the first reaction high after where you marked the beginning of the pattern, you would instead see a smaller rising channel developing. If you trace the pattern off the lows, the bottom of that big Jan. 3 candlestick, the Nasdaq was clearly a large rising channel. You also ignore the fact that volume did not pick up as we pulled away from the wedge; even after factoring in 10% lower volume after the Nasdaq trade counting change, volume is still lower than it was within the pattern, and even appears to have declined as prices pulled away from the pattern. Not the kind of action you would expect on a break from a rising wedge. We could retest or hit new lows for other reasons, but you have to ignore too many factors to call these wedges. I called wedges all the way down; I do not see any here.
