The Classics Are Still The Best
Yes–long-term trendlines do tend to produce nice
bounces.Â
The biotech index followed through off the bounce from the long-term-trendline support I talked about in my Wednesday
Chart of the Day. On Wednesday, I had said:Â
“The widely followed Biotechnology Index (BTK)
bounced off a long-term trendline. I have found that trendlines extending back
a year or more tend to produce consistent bounces.”
Friday’s action confirmed this scenario with a 7% gain, taking
the BTK back up above its 50% retracement (April low to Sept. high).
So–no question–you should keep your eyes wide open for price
action that hits long-term trendlines in all the stocks and indices that you
follow. You will find good opportunities from this very simple setup.
Also of great importance–look for many individual stocks within
an industry group to be hitting or bouncing from support at the same time. We
saw this happening among a number of the biotechs and this added some rocket
fuel to the fire. Check these out.
Myriad
(
MYGN |
Quote |
Chart |
News |
PowerRating) bounced off an eight-week trendline.
Same kind of thing with Human Genome Sciences
(
HGSI |
Quote |
Chart |
News |
PowerRating) but
from the bottom of a trendline channel.
For Abgenix
(
ABGX |
Quote |
Chart |
News |
PowerRating) too.
When I thumb through traders’ magazines and see ads for all
these new computerized trading tools such as fuzzy logic, neural nets, and heat
maps–it’s refreshing to see that classic patterns that most beginning traders
use when they start out–still blow ’em all away.
Have great holiday weekend,