Forum Archive Index - May 2002

["nick" <helmett@xtra.co.nz>]

        I read an interesting critique of  Bulkowski's work. The two main
areas of contention were
1. Most of Bulkowski's analysis took place during one of the longest bull
markets in history. The patterns are
    likely to be much more reliable in such an environment
2. Many of the patterns apparantly are cited as only having a 2% failure
rate, while the rectangular breakout had  a success rate of 100%

       The reviewer did find the book useful but felt that the percentages
given were very subjective and should not be taken as gospel. In the case of
AUO im sure that Gerry has done a good job checking out the fundamentals of
the company which alone make it worth a second look.
    The wedge in this case has been caused not by normal stock action but by
50 million  new shares entering circulation which were bought by existing
shareholders for .45cents a share.
Of course this had the effect of bringing down the price, from around .67
cents to .55 cents. This has resulted in the "wedge", so it is a wedge thats
not a wedge, it is rather a normal response to a flood of cheap shares
entering the market

   Nick



> AUO has formed a near perfect classical Falling Wedge formation. These are
a bullish consolidation pattern, with a very low failure rate. 92% of these
formations break out to the Upside. Of these 92%, only 2% fail to continue
upward by 5% or more.
>  Since 90% of these formations result in a successful upside breakout,
there is little need to wait for the breakout before buying the stock.
However, because prices are trending down in the short term, it is probably
to your advantage to wait for the upside breakout.
>
>                     Phaedrus.
>
> (All statistics quoted are from the Encyclopedia of Chart Patterns by
Bulkowski.)
>
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