I would like to add to yesterday’s post on the possible H&S top that has been forming for sometime now on the HUI. I felt that was enough for one day yesterday, so here is the rest of the story. Most TA’s have been looking at the HUI in log scale, including me, for our price projections. The numbers that the log scale produce are considerably higher than the linear scale when measuring pattern movements. Awhile back I decided to look at the HUI in linear scale just for the fun of it. What I found out by looking at the long term trend channel is that we could be moving in linear scale rather than log scale.
Below is a chart of the HUI major uptrend channel for the complete bull market to date. The first thing that struck me was the top rail and the bottom rail are completely parallel to each other. This sets up a very nice channel to trade in. We have had 5 reversal points within this channel and the last touch was our March 08 high just above 500. Notice the little red circles at the top and bottom of the uptrend channel. What they mean to me, IMHO, is that when we spiked thru the bottom rail in August of last year, marking the 4th reversal point within the major uptrend channel, we had to do the same thing when we got to the top rail. The HUI was looking for symmetry. A nice little spike up thru the top rail, our 5th reversal point so far, marked the end of that rally phase and the head of our H&S top pattern.
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We’ll get back to the H&S top in a minute but there is one more major clue that suggest the our latest top maybe significant, at least in an intermediate time scale. I know most of you folks are probably tired of me and my halfway patterns but I would like to show one on the HUI that is as beautiful as it gets. This one is uncanny in calling the top at 521 to the dollar.
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When we get a measured move like the one you just looked at, you start to look for an intermediate term reaction to that move. This takes us up to our current situation with the H&S top. This H&S top formation that has been forming for close to 9 months now, is maturing out just under the top rail of the major uptrend channel after a measured move of the triangle halfway pattern to boot.
Again just watch the sign posts along the way as to what is in your best interest.
All the best …Rambus
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