For those of you who have come to our free webinars and those of you that have attended our 3 day trading course online know that the Parallel Channel is the root of the bread and butter pattern, the AB=CD. The chart posted here is a picture perfect example and could have been pulled out of H.M. Gartley’s description of this pattern in his 1935 book, Profits in the Stock Market.
One of our last posts stated that any rally up to the 1147 area would be a shorting opportunity.
You can clearly see on this chart that it was the upper end of this Parallel Channel range. The SP 500 has now traded down to the lower end of the Channel.
The main question now is, do prices break the lower end of this range?
These questions are usually impossible to answer in advance. In lieu of trying to predict this, traders at this point want to monitor any rallies up, to access the strength or weakness, and watch the lower end of this range. A decisive break of the lower end can lead to a much larger move down.

This entry was posted on Tuesday, January 26th, 2010 at 7:01 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.