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Friday, April 17, 2009

Where Dow and S&P 500 Bear Market Rally Heading?

Do you notice a possible Rounding Top Pattern forming in DOW and S&P 500 Charts? Noted by one TA expert.

A Rounding Top Pattern is a consolidation and distribution pattern.

Consolidation occurs when a downtrend slows:

  1. Prices cluster, or hover, near a particular price level. Price stops falling.

  2. The consolidation period is usually a narrow trading band.

  3. Prices has small rallies and small retreats.

  4. The trend is sideways.

  5. Consolidation in a downtrend is a signal that accumulation is developed.

  6. In an uptrend, consolidation also develops as a narrow trading band. This is not called consolidation, but has the same features. The price activity stops trending upwards and moves sideways. This is a signal that distribution is developing.”

"Distribution occurs when early buyers decide to sell the shares they have accumulated. As the price rises, they offer their shares for sale. As more and more shares are offered, it becomes more difficult for the price to continue rising. This distribution phase shows the end of the uptrend.”

Source: Daryl Guppy

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