There’s a Seasonably Spooky Stock Chart Making the Rounds

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Not even the markets are immune to the time of year. No kidding – CNBC even asked me to do a segment tonight on my top three Halloween spooky-scare stocks.

What’s more, a chart designed to impart maximum shock value has been circulating around the internet.

So I’d like to interpret it for you and let you know what’s wrong with the chart – and even some of the ways it’s right on.

This chart has the potential to influence a lot of folks’ decision-making at this juncture in the markets, so it’s important everyone is clear-eyed about what this is and what it isn’t.

Have a look…

This Is an Awfully Dire-Looking Forecast…

Now, oddly enough, this is from a reputable research firm, and at first glance, it looks as though the technician that constructed it knows his stuff.

chart

Now, to be honest, there are a few things here I find myself in agreement with. I think the upper trend line is drawn correctly and has some validity. And, unlike a mirror, if it’s broken, we’ll have seven more months of uptrend.

What’s more, the concept of “increasingly dangerous bubbles” is quite compelling, and I believe that we will look back on this bull market and call it the “QE bubble.”

Now, there are some things here I’m not too crazy about.

For starters, saying that we are not in an uptrend because the move up has been caused by multiple bubbles is patently absurd. If I’m running fast just because I’m being chased by a rabid dog, that doesn’t negate the fact that I’m running fast. It just explains why…

And that bottom trend line (lower support) of the wedge is totally subjective – and capricious. And that means this isn’t really great technical information upon which to base an investing decision.

I’ll show you why in a chart of my own.

Here’s the Right Way to Look at It

Let’s buy into the fact that we’re looking at a rising wedge – hey, we probably are.

However, to complete the pattern we really need a legitimate third touch of that bottom support line. And until we get the third touch, that line can move. In fact, it already has. Here’s what that line looked like before the August through October 2015 lows were hit:

stock chart predictions

If we look at that line now, we see that it was broken with multiple closes below it:

how to read stock charts

Any exit on the break of the original line would have had you forfeiting a 12% to 13% move higher.

The bottom line? This rising wedge pattern is a useful one to watch and it will become critical, once we get one more successful test of the bottom support line. Until then, it’s a just another pattern in development. The “line in the sand” is still holding.

 

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The post There’s a Seasonably Spooky Stock Chart Making the Rounds appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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