For today's chart we have chosen to take a look at IBM because it is quickly approaching the neckline of a well-formed head and shoulders pattern. As you know, this type of pattern is often used by technical traders to predict a change in the direction of the current uptrend, and is generally deemed to be quite reliable. The reason that the head and shoulders pattern is so popular is because it accurately depicts what is happening to the supply and demand of the security. The first trough found after the left shoulder is the first indication that the strength of the uptrend is dwindling and about to reverse.



IBM_012506.jpg

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