The Morning Cup of Jo
Gotta go where the party's at.
If yesterday were a race, Snapper the Turtle would have won. After 5 straight down days the markets finally eked out a positive one. However, the Nasdaq only came in with 1.7 Billion shares and the NYSE only pulled off 1.36 Billion - about 10% below 50-day average volume. That's not the kinda volume Hoofy wants to see on the upside (no real buying conviction), but Boo on the other hand is getting more and more excited. (Better than average volume down and less than average volume up.)
But Hoofy, being the eternal optimist, continues to look for opportunities wherever they may lie. Scrolling through his charts and trying to not swim against the waves, he found a pattern in the Nikkei resembling a posting on Bull & Banter yesterday - A Head & Shoulders Bottom. Let's take a look...
Head & Shoulders - this pattern is one of the most famous for not being read correctly. A lot of investors, and Techies alike, read the lines and try to fit a pattern to any situation. This can hurt in the long run and create many false positives. What you should look for in a H&S is a definitive left shoulder after a RH (Relative High). The Head forms when the pattern drops below the peek of the shoulder and returns back to the neckline. (The drop of the 'head' should never be more than twice the depth of the shoulder.) The pattern becomes more discernible when it starts to build the right shoulder. (Investors can start watching more closely once the RH - set back on the left shoulder - hasn't been broken for a 3rd time.) In this shoulder (not in the graph above) the volume should dry up on the downside. This lets you know the sellers are being exhausted. Once the Neckline (Horizontal Resistance Point) is broken - it could be off to the races, but remember - gotta have the volume to support the break.
Always looking for the easy money (large reward, small risk), Hoofy decides to walk away from the Nasdaq, for now, and set himself an alert for an 11,250 break above the neckline to possibly put his money to work in Japan.
I'll be out again today, so won't see ya on BB - sorry.
Until next time...
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