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Mixed Signals

  • Written by Syndicated Publisher No Comments Comments
    June 16, 2012

    I have been expecting another short decline to finish out the right shoulders of a reverse head and shoulders pattern, but once again the Mr. Market said: “Expect whatever you like. I don’t care.”

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    (Excerpt from the June 15, 2012 blog for Decision Point subscribers.)

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    My problem is that, being a person who likes things to be nice and neat, I wanted the right shoulder to be more even with the left shoulder. But no. What we have is a formation that is very lopsided, but I think it is close enough to be considered a completed reverse head and shoulders pattern. The neckline has been penetrated, so the minimum upside target is about 1430.

    Revhs

    Unfortunately, the bullish breakout on the price chart is contradicted by the Climactic Volume Indicator (CVI) chart, which spiked to a level that usually signals a short-term top.

    Chart

    Conclusion: It is possible that Saturday’s upcoming elections in Greece may have triggered some short-covering ahead of the weekend, resulting in a rally that may prove to have no legs. The breakout is far from decisive, and the CVI indicates a possible exhaustion climax, so I remain skeptical of the rally.

    Images: Flickr (licence attribution)

    About The Author

    Carl SwenlinCarl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.
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