Wednesday, May 20, 2009

Reverse head and shoulders on Top40


Top40 end of the day chart made reverse head and shoulders and broke neckline on 18th May. Target for this move is 23000 exactly what was previous support now resistance. Neckline of head and shoulders was in the same time 23.6% Fibonacci level for the drop from all time high on 22.May 2008 to low on 20.November 2009.

Reverse head and shoulders are usually nice pattern to trade but don’t forget possible back test of the neck line around 19700. Neckline was tested 5 or 6 times over last few months so it should be solid support now.

How I see this playing out is market will hit resistance just above at 20850-21000 then retrace back to retest neckline around 19700 and up towards 23000.

Break above 20850-21000 would signal medium term buy signal based on Dow theory.

Trade well.

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