The problem with that observation on the DJI bear flag is that it is not tilted all that much and, really, could equally well be seen as a triangle pattern, likely a pennant. Is that bullish (reversal) or bearish (continuation)? The answer is yes--it could be pattern indeterminate. This is the area to expect a rally and I wouldn't be fighting it just yet. It may suck as a rally but it isn't likely to go down well either given the oversold and put/call factors.
I've always believed that flag (or pennant) formations ultimately strike to the side of the prevailing trend (in this case lower). It's not absolute (what is?) but when juxtaposed against the 200-day and the March lows (below both), the benefit of the doubt must be given to Boo. That, of course, doesn't mean right here, right now--and this could very well be invalidated with a strong pop--but in a vacuum, it's bearish (in my humble view).
Also keep in mind that there are two types of technical analysis--charts and indicators. While lotsa charts are broken, a fair amount of indicators (and oscillators) are pointing north by northeast. When in doubt--or in the face of conflicting signals--it's sometimes a good idea to do a little less or trade in smaller size. Again, this is just my two cents but I've learned many expensive lessons in my time and if those mistakes save the Minyanship from making the same, then our goal in the 'Ville will have been attained.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter