It’s the prerogative of markets to change their mind.

Followers of technical analysis should never get too cocky. The reason. Corporate stories are never concluded as long as they remain listed, and the share-prices ebb and flow in response to the prevailing winds.

To illustrate, five days ago I posted a chart of CBA in an article titled Investment Brinkmanship” which appeared to show the formation of a Head and Shoulder Pattern.

https://technicality.me/2017/03/24/investment-brinkmanship/

I did warn that this pattern would be negated should the share-price rebound above the previous high at $85. Precisely this occurred today with the share-price at the time of writing being $86.20.

  1. Daily chart of CBA from March 24.

CBA Mar 2017

 

2. Daily chart of CBA March 29, 2017

CBA Dy Mar 29 2017

Technical analyst skeptics would argue that this proves the unreliability of technical methodology.

However the tale is not yet finished. I may have foregone the profit gains of the last two days, but I have been able to take a position in the possible take-over target Myer Holdings Limited. Only time will tell if the switch was worthwhile.

3. Weekly chart of CBA 29/03/2017

CBA Wk Mar29 2017

CBA at some time will test the previous share-price high at $95, but it could also fall back into a trading range between $70 and $80 before it does.



Categories: Chart Analyses, Trading opinion

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