Tortie Portfolio : Atypical 'Head and Shoulder'
Friday, August 11, 2006
While monitoring the share price movement of Maybulk, I noticed an atypical
'head and shoulder' pattern of the stock which was formed early this year.
From February to March, it looks like a 'failed head and shoulder' which was unable to
break through the neck line. That resulted in the subsequent 'second head' (?) (Any
better suggestion?) in April. However, the neck line was broken on 19.4.2006, the very
ex-date of the fat dividend. And the subsequent decline corresponded quite well with the
predicted range (Well, textbooks say 'at least', but you can not expect real life to be so
mechanical, right?) The whole 'thing' took 4 months to complete, followed immediately by
a healthy rebound and recovery. This is fair to a good stock like Maybulk.
I think this is an interesting case study for technical analysis. Everybody with slightest
knowledge of technical analysis knows 'head and shoulder' (not that anti-dandruff shampoo).
But recognition in the real life could be a challenge. Some might not agree that it was a
variance of ''head and shoulder', some might agree with me. The point is, whether one can
see the pattern and use that recognition to correctly predict the subsequent price movement? That's the whole idea of Technical Analysis, right? :)
posted by winpulse @ 1:49 PM,
3 Comments:
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At 10:05 PM,
CS Lee said...
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This chart cannot perform correct studies. The big gap on april need to adjust so that the indicator can perform. (Due to dividend disttibution).
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At 1:28 PM,
winpulse said...
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Thanks for your comment, John.
Yes, I agree with you that it is better to adjust the dividend distribution before doing the analysis.
Unfortunately my EOD data doesn't adjust for dividends. Which is why I think is causing the 'atypical' pattern due to the 'distortion'.
Will have to see the 'adjusted' pattern to see if my hypothesis was correct :) -
At 6:56 PM,
James Smith said...
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