I have placed below an interesting chart of the Dow, going back several years. Here we see what is known as a "megaphone" formation. This is a five-point reversal pattern -- the first point on the chart being Dow 11750 with the second point being 7197.
As I said, this is a five-point reversal pattern with points 1, 3 and 5 each higher than the preceding -- and point 4 being lower than point 2.
The megaphone formation is indicative of an item that is spinning out of control -- whipping crazily first up and then down -- as if it is searching frantically for a trend. What I am most interested in is whether at point 5, the formation is exhausted. If so, we could see the whole megaphone formation collapse.
Is today's sell-off in the Dow the start of the megaphone's coming apart? The answer is that it's too soon to know. ... Log in or subscribe to continue reading.
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