Thursday, January 27, 2011

Trendline Breakout Target Has Been Met

According the work of Thomas Bulkowski at the most common target for a trendline breakout is 80% of the depth below the trendline before the breakout.  We are now within a couple of points of that target for the SP500.  The most common course of action for a market or stock after a successful breakout is to retest the trendline, which we have yet to do.  Although there are multiple levels of support for the SP500, the most logical expectation is for a retest of the broken trendline.  The longer it takes, the further down the trendline projects, but it is still above the July 2010 low at the moment.

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