Forum Archive Index - May 2002

["andrew cottingham" <arco@adinfinitum.co.nz>]

Phaedrus

Quote "The Falling Wedge formation shown by this stock has been described by
others here and elsewhere as a Pennant. It is not".

When is a pennant not a pennant. - (You say tomato, I say tomaeto!).

There are varying theories on what is a pennant, and what is not.
Bulkowski is a relative newcomer to the game, and he contradicts himself
many times. On page 214 of his book under the chapter Flags and Pennants he
states "pennants  - short term (upto 3 months) consolidation"

Arthur Hill states.........Pennants.........Duration: "Flags and pennants
are short-term patterns that can last from 1 to 12 weeks".

The first charting book I purchased in the 80's  - perhaps considered by
many as the chartists bible - Tech Analysis of Stock Trends - Edwards &
Magee, Page 209/210.........states "a pennant might also be described a
short compact wedge". Refer Anaconda Copper - Plate 110 - showing a falling
pennant of over 2 months duration.

At the end of the day they are all 'consolidation patterns' and whether we
call them wedges, pennants or a box of candles is probably irrelevant and
down to personal preference, what is more important is our interpretation of
forthcoming moves.

Andrew




----- Original Message -----
From: Phaedrus <Phaedrus@techemail.com>
To: <Sharechat@sharechat.co.nz>
Sent: Saturday, May 18, 2002 10:26 AM
Subject: [sharechat] AUO Chart/Phaedrus


> Try viewing this problem from a different perspective. That of someone
wanting to buy this stock. They could be buying because of favourable
fundamental analysis, or because they have noticed the bullish falling wedge
formation, or because they are simply following Gerry's tips. Whatever they
may be, the reasons are irrelevant. These people all want to buy at the
lowest price possible. We can see from the chart that prices were in a
secondary downtrend, steadily falling from a peak of 68 cents. Nick would
have us believe that this was not a "real" downtrend, not a "real" falling
wedge, but was "rather, a normal response to a flood of cheap shares
entering the market". Fact is, the price was falling, whatever the reason(s)
and the longer you delayed, the cheaper they got. So, when to buy? Obvious -
when they stop falling and start rising. When they break above the
trendline, breaking out of the falling wedge formation. This occured on
15/5, giving an entry at 58 cents.
>
>  It seems to me that the root cause of this wrangle is that some of you
want the price chart to reflect the underlying "worth" of the stock. It does
not do this, cannot do it. What it does is of much more use. It shows us the
true current market value of the stock at any time - what you would get if
you sold, what it would cost you to buy. Reality.
>
>  The Falling Wedge formation shown by this stock has been described by
others here and elsewhere as a Pennant. It is not.
>  According to Murphy "The pennant is a relatively short term pattern, and
should be completed within one to three weeks". Or Bulkowski "Flags and
pennants are short, from a few days to 3 weeks."
>  Murphy states that "Falling Wedges usually last one to three months",
Bulkowski "A Falling Wedge has a minimum duration of three weeks. Formations
rarely exceed four months long."
>  With a duration of 2.5 months, this was a classical Falling Wedge
formation.
>
>                  Phaedrus.
>
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