DOW CAUTION
DOW CAUTION
By Daryl Guppy
The head and shoulder pattern that has developed in the DOW has been technically invalidated by the weekly close above 10,600. The head and shoulder pattern is a powerful reversal pattern that has around 80% reliability. When the pattern develops then eight times out of ten the pattern continues to develop and achieve its downside targets.
If the definition of the head and shoulder pattern is less rigorous then the results become less reliable. The head and shoulder pattern is created by a series of three rallies and retreats developing over several months. This is not a short term pattern of behavior. It captures the broad macro-economic changes in economic activity.
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