Thursday, September 17, 2009

The Sprit of the analysis

A few weeks ago, I wrote about some changes in the stocks that were getting way too much share of the market's daily volume. One of them was Citigroup (aren't they like Village-group by now?) and I said it had an island gap reversal.

One reader commented that I was wrong about the pattern since it did not conform exactly to the rules. My reply was that it met the spirit of the analysis if not the letter of the law. It also had a small RSI divergence so it was good enough for me.

As we can see in this chart two weeks later, it worked quite nicely.

The moral of the story is once again to use a fat crayon and not a fine point pen to draw technical patterns.

No comments: