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Minyan Mailbag

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Qualifier!

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.


Todd-o,

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.

Regards,
Minyan Bryan


Minyan Bryan,

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.

Best,
Toddo

R.P.
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