Morning Update

Reverse Symmetrical Triangles

There are two types of Reverse Symmetrical Triangles; a Reverse Symmetrical Continuation Triangle and Reverse Symmetrical Triangles. A Reverse Symmetrical Continuation Triangle rallies up, then pulls back and then shoots up through the triangle to make a new high on a parabolic run up. A Reverse Symmetrical Triangle does the opposite and goes down and turns into new multi year lows. Both types of triangles are significant but rare patterns. Please have a look at the chart of Caterpillar at the bottom of this update to see an example of a Reverse Symmetrical Continuation Triangle.

The Dow Jones Transportation Average (TRAN) - Daily Chart
The TRAN is in a reverse symmetrical triangle continuation pattern. The TRAN is currently in a parabolic up move out of the RST, and is at all time highs, it is at 4367.54 today. This is a chaotic pattern-which goes parabolic and creates shock and awe. The TRAN chart may look toppy, however it keeps going higher, because there is no resistance above. Indicators and oscillators are bullish and making new highs along with price. (Remember the DAX looked just the TRAN does now this last year and it has rallied 100 points)

The S&P 600 Small Cap Index (SML) - Daily Chart
Today the small cap index made new 52 week highs at 379.84. The daily chart remains in its reverse symmetrical triangle (RST). As always, the general rule of thumb is, that higher highs are bullish even though this pattern itself is treacherous. The RSI on the daily chart is heading higher and is at 671.7, the stochastics are bull flagging, and the williams% indicator is bullish and trending. It remains to be seen if this pattern will over shoot the upper trend line and turn into a continuation RST. Do not let this pattern scare you out of the market and prevent you from trading. (Bottom Line I really want to get into the Bio-Pharma sector)