Posted by 15 February 2005

Internet Stocks Build a Major Top

Michael Kahn has identified the dreaded “three peaks and a domed house” pattern in the internet sector:

The point is that the Internet sector seems to be immune to short-term technical signals. Perhaps when a sector is as volatile as this one is, we have to pull back to a bigger view of things, as whipsaws can be common in any short-term analysis.

That brings us to a longer-term pattern that seems to be describing the action in the Internet sector perfectly — a word that is rarely, if ever, applied to the translation of textbook patterns into the real world of the stock market.

Back in the 1960s, a chart watcher named George Lindsay discovered a very complex pattern that can form when a sector or the market as a whole is in the midst of a topping process. He called it “three peaks and a domed house,” which, in typical technical jargon, simply described the visual appearance of the pattern. [read the entire article]

(Thanks to Duru for passing this along)

RSS Feed Subscribe to get Free Updates.

Comments

  1. Posted by C. Maoxian on February 15, 2005 at 2:13 pm

    The opposite pattern is the Three Valleys and a Flooded Basement, which is of course a well-known seasonal pattern.

  2. Posted by Michael on February 15, 2005 at 2:20 pm

    LMAO

  3. Posted by OuijaBarfandHandle on February 15, 2005 at 2:25 pm

    I prefer to make my trading decisions using a Ouija board.

  4. Posted by Mousefinger on February 15, 2005 at 2:58 pm

    LMAO @Maoxian! Hehehe…that was awesome. :-)

  5. Posted by Michael on February 19, 2005 at 2:57 pm

    The first time I heard of this pattern was Barry Ritholtz mention of it regarding the S&P 500 on Dec 3rd. Since then I have heard of it several more times.

    I would guess a lot of technicians are struggling to add value in here.