Forum Archive Index - November 2001

[Phaedrus <Phaedrus@techemail.com>]

 (As requested by Ben.) This chart shows a clear "V" type reversal, where the 
downtrend ends and goes straight into an uptrend. The red dots mark the points 
used for the initial tentative trendlines, the blue dots mark where these 
tentative trendlines were confirmed. 
  Critics of this type of trend analysis claim that it is only possible to draw 
charts like this with the benefit of hindsight. They also claim that trendlines 
can be drawn almost anywhere at the chartists whim, or only with the 20/20 
vision of hindsight.
  These arguments are easy to refute. On the chart I have plotted tentative, 
unconfirmed trendlines, drawn as events unfolded. In order, they were T1, T2 
and T3. None were confirmed. The next tentative trendline drawn became the only 
one to be confirmed by subsequent price action. (In fact it was confirmed 
twice.)  Careful examination of the chart will show that from 10th September 
onwards, there was only one possible position for a confirmed trendline. It 
didn't matter who you were or what you thought. That trendline was in place and 
confirmed, long before it was broken, and gave a Buy signal.
  Similarly, the current upward trendline (confirmed on 25/10/01) is in the 
only place it could possibly be. In this case, it was the first tentative 
trendline drawn that went on to be confirmed. I would defy anyone to draw any 
other trendline here - it is where it must be, the only place it can be. 
  One of these days, ELD will break this trendline, and anyone using this very 
simple trading technique will have made a handsome profit. Wiseacres will then 
say "Ah, but you have drawn this chart using hindsight - it wouldn't be 
possible to trade like this in real time."   
  How wrong they are!  
         Phaedrus.

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