Gem Of A Breakout?
Up until now I have resisted the temptation to talk
about the widely watched diamond formation in the Dow
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PowerRating). Many market
observers have talked about it endlessly over the past several months. Frankly,
I think the talk had been premature. The diamond formation has not been of much consequence
to the average trader.
Today’s action in the Dow may change that, however.
For the first time since April 12, 2000, the Dow is challenging
the top of the diamond. In fact, as this is being written, the Dow is thrusting
right through it.
Watch how the Dow closes today. If it makes a decisive close
above the diamond, we may see an upside acceleration. If it doesn’t, the Dow may
ricochet lower as it did back in April.
By the way, I think it’s important to not read too much into
this pattern. Many technicians view this as a bearish pattern and typically call
it a Diamond Top Formation. I don’t personally think it has any kind of
directional bias and prefer to just watch it break out in one direction or
another.
See you tomorrow,
Eddie