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Point & Go Figure



These are some charts that caught my eye over the weekend. I have added text and illustrations where necessary.

All charts courtesy of Dorsey, Wright & Associates.

Is GE still an important stock? A general among infantry? So far the trend line from the March 2003 lows remains intact. A violation of this trend line would be important to me.

General Electric Company (GE)

Perhaps this longer-term chart of GE will better illustrate why I believe the stock remains an important tell in this market. GE violated what I believe was a secular trend line dating back to the early 80s in June 2002. The longer-term chart below shows that now GE has retraced a little more than a third of its move down from the high of 60, and the stock is quickly approaching this important downtrend line. Seems like it sure has taken a lot of energy since March 2003 to get here.

General Electric Company (GE) (2x3 scale)

PnF charts provide a context for decision-making. In my opinion, they prevent arbitrary buys and sells based on emotion. For example, WFMI last gave a sell signal on the chart in July 2002. Would I consider buying it here? Of course not. The nearest support level is 126 and I would not be able to gather enough evidence to say I am wrong about the stock until it moves to 116. Being "wrong" on a stock and being "wrong" on an entry point are two different things.

Whole Foods Market, Inc. (WFMI)

Google (GOOG) gave a sell signal on a 4x3 chart last Friday. But a 5x3 chart shows a slightly different picture. Which chart is more important to you depends on your timeframe. But if both charts line up and agree then, timeframes notwithstanding, the probabilities would suggest a more serious move down is underway.

Google Inc. (GOOG)

Monsanto Company (MON)

No positions in stocks mentioned.

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