| | Chart Tip
There is a pattern that may not have a name but if you look at enough charts you will see a very interesting thing that does occur. On the 3rd, 5th or 8th day a stock will generally reverse course! What? That's right. Suppose a stock is falling. Very often the stock will halt its slide or even rebound on the third day. Now if it doesn't hold up on that third day watch for the falling to stop on the 5th day and then again on the 8th day.
Not much has written about this phenomenon, but after watching charts for all these years it has come through very clearly. Likewise it's often the same case with a stock that has been moving higher. It will pause on the 3rd, 5th and 8th day, but interestingly the effect isn't as strong as on ones that are falling. In other words, when a stock is falling, the 3,5,8 day reversal is often very strong but on a rising stock the effect is more like a pause than a reversal to the downside.
Many times when you see a stock listed, it is one that is coming up on either a 3,5 or 8 day fall and we say something like "this one looks ready to reverse and head higher". Astoundingly quite a few of them (over 80%) usually make a one day reversal pop. So, along with other indicators, take the time to look for stocks that are coming up on that 3,5 or 8 day area and watch to see if the theory holds true.
Some charting programs actually let you filter for things such as this, as you can input parameters like "stocks down 2 days" or "stocks down 4 days". This way you can get a sampling of who is in that situation and watch to see if the reversal comes through for you.
Last edited by drunkguy : 02-26-2007 at 02:26 AM.