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CHART ANALYSIS

Triangles, a Pennant and Fan Lines, Realnetworks is Ready to Play

05/31/02 10:06:58 AM
by Andrew Hetherington

Amid a montage of chart patterns comes a breakout for Realnetworks.

Security:   RNWK
Position:   N/A



The daily chart for Realnetworks (RNWK) shows a 5-month ascending/symmetrical triangle. The volume on this triangle diminished throughout the pattern and is well-formed. There is a breakout three quarters of the way through the pattern towards the apex on strong volume. This breakout had a small throwback that formed a pennant. This throwback is the appropriate time to take a long position. A case can also be made to call this a symmetrical triangle, depending on where you place your top line. This bottom reversal triangle is of sufficient size to have a considerable impact on the equity price.

There was an early warning on May 15, 2002 when the volume increased to 1.3 million shares and the equity went from $7.11 to $8.02 while closing at $7.70. Knowing that the third fan line had been broken with increased volume to change direction from down to up, along with the early warning, gave every indication of an up-move to follow. In addition, we also know the QQQ bottomed at $28.42, so overall market sentiment will be helpful as well.

Graphic provided by: SuperCharts.
 
On the weekly chart diminished volume on the pattern is easier to view, as are the fan lines. You can see how far down this equity has come so there is plenty of upside potential. A reminder is necessary since large drops in price are not always ready to reverse. You must wait for a reversal pattern to be completed before jumping in. The anticipated up-move is likely to be in the $12.00 - $12.80 area initially.


Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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Date: 06/01/02Rank: 5Comment: 
Date: 06/01/02Rank: 5Comment: 
Date: 06/02/02Rank: 3Comment: 
Date: 06/03/02Rank: Comment: I m on the learning curve, so if you could clarify something I would appreciate it..Are you suggesting that the reversal won t be complete until the stock hit 12.00 or 12.80?
Date: 06/04/02Rank: 4Comment: 
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