I Hope He's Wrong
China Education Resources (CHN.V) closed at $1.10 yesterday, up another 5% or so. After examining the latest charts, I couldn't help but be reminded of what John J. Murphy said in his book, Technical Analysis Of The Financial Markets, regarding the flag-and-pennant continuation pattern. John said that if a stock rose sharply in the last while and is currently proving this sort of continuation pattern, it will most likely rise the same distance it did in the previous run before entering a different pattern.
CHN will serve as the perfect example to put this theory to the test. Beginning in early October, the price rose from $0.40 to $0.90 before taking a breather. The continuation pattern was proven when the shares went from $0.90 to $0.70 on very low volume. Now according to the theory, the stock should rise about another $0.50 once the correction is over, which would place the highest point around $1.20 - only $0.10 more than yesterday's close.
Personnally, I don't rely too much on technical analysis of this sort, and that's why I won't sell any of my shares this week. If this theory materializes, however, I might want to read John's book a bit more carefully next time.
Please do your own due diligence, these are not recommendations.
posted by Eric G. at 11:42 a.m.
4 Comments:
CHN.V closed at $1.23 today, meaning we won't have to wait much longer to find out the validity of this theory.
$1.20 has come and gone, and no sign of CHN slowing down. We closed at $1.40 today.
I sold at $1.40 last week. I'm expecting the price to drop down around $1.15 or so, at which point I would probably buy back. This will be a $2.00 company by the end of the year.
CHN is now trading at $2.20. It did in fact drop down from $1.40 to $1.20 shortly after I sold, but I did not buy back since I thought it would continue going down. The price rose from about $1.25 to $1.70 in one day.
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