Forum Archive Index - December 2003

[Phaedrus <Phaedrus@techemail.com>]

Bill,
     After a spectacular uptrend, this stock had a "V" reversal, and went into 
a downtrend for 9 months. At the end of this downtrend, it entered a 16 month 
29 - 39 trading range. (A reminder, if we needed one, that the end of a 
downtrend does not automatically mean the beginning of an uptrend). 
 After a downtrend, trading ranges like this are most commonly a consolidation 
(continuation) pattern, in that the majority of them break to the downside. 
That was certainly the case here - at the end of November price action clearly 
broke below this established trading range. Not long after this COH plunged by 
nearly 30%. While the break below 29 was the kiss of death, to my mind the real 
warning came a week before the end of the trading range, when prices broke 
below the support at 30 for the first time in well over a year. (Marked by 
black arrow) This level had been tested and had held on three separate 
occasions over this time. Breaking below this previous support level was a very 
significant event.
 Where to from here? Some technical analysts believe that consolidation zones 
like this mark the midpoint of a "measured move". In other words, the 
percentage fall after the consolidation approximately equals the percentage 
fall leading up to the consolidation. If this theory holds good here, then COH 
has reached this target and should not fall further. 
 Like you, I would want to see some evidence of an uptrend before buying, 
though with the massive spike in volume (the highest ever for COH) this looks 
like a classical price/volume climax. These commonly occur at major turning 
points.

             Phaedrus.

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