Monday, February 4, 2008

Technical rule #1

I'm sure everyone knows by now I'm not a big pattern fan. There are two patterns that I do pay attention to. One is triangle patterns. These are almost always a consolidation or distribution pattern. The other is the technical rule #1 pattern. (The tech rules are on the lower right side of the home page). The more I see this pattern the more useful I find it. More on this pattern in tonights update for subscribers. Looking at the chart above we see the tech rule 1 pattern playing out to a tee. the first move down followed by a short consolidation and then a second leg down of similar magnitude. Then a retracement back to the consolidation area. I've also noted the resistance level from the Aug. & Nov. lows along with the declining trend line. I suspect somewhere around 1400-1425 the market is going to run into stiff resistance and we are going to break the rising trend out of the Jan. low for a retest of the lows and possibly another leg down.