Appendix A: Basic Investment Decision Making Based on Chart Analysis
A.3.2 evidence for Maintaining That the Stock is
Bearish over the Long Term
Referring to the medium‐term chart in Figure A.1, we see that the stock is currently
below its 20‐, 50‐, and 200‐day moving averages, a bearish sign. We also see that
price has been making lower highs over the last four months, forming a descend-
ing triangle of sorts. This is again a very bearish medium‐term indication. We see in
Figure A.4, a long‐term chart for the stock, that price has finally breached the long‐
term uptrend line (3), as well as violated the previous support level (1). For the first
time in many years, the stock has also finally made a lower low. The stock’s MACD
indicator also exhibits standard bearish divergence (4) and we also see that the
accumulation/distribution indicator has also breached its own uptrend line. Finally,
in Figure A.5, a medium‐term Point and Figure chart, we observe a triple bottom
breakout, adding to the evidence that the stock is currently overwhelmingly bearish.A.3.3 participatory Options for the Long‐Term investor
Who Has Turned Bearish
For the more risk averse long‐term investor we recommend staying in cash instead
of participating in the stock.
For the more risk seeking long‐term (bearish) investor, we recommend buying
into the stock only after a significant decline in price and only beginning to con-
sider participating in the stock once price starts to consolidate around a certain
price range for at least a few months. We may then start to accumulate in small
measures.A.4 AdViCe fOR THe SHORT‐ And MediUM‐TeRM
BULLiSH TRAdeR
A.4.1 The Climate in Which the Stock is Trading
(the index)
We have already identified and covered the numerous bullish indications in the
index as noted in Section 2.1 above and will apply them to the long‐term chart in
Figure A.7 and the medium‐term chart in Figure A.8.A.4.2 evidence for Maintaining That the Stock is
Bullish over the Short to Medium Term
We have also already identified and covered the numerous bullish indications
in the stock as noted in the previous paragraph in Section 2.1 with regard to
Figures A.1, A.2, and A.6.
In Figure A.3, the short‐term chart of the stock shows price finding support at
D, the projected 1:1 minimum measuring objective based on the channel height.
Price is also hovering above the previous support level (indicated by line 2). Again,
as long as the stock remains above these supports, the bullish view of the stock
remains intact.