CHART ANALYSIS

American Express ... Membership Has Its Rewards?

07/15/02 12:28:20 PM

by Andrew Hetherington

Take advantage of the multiple chart pattern formations on American Expess (AXP).

Security: AXP
Position: N/A

Graphic provided by: SuperCharts.

This unusual pattern shown in the figure above is an 8-month symmetrical, right-angle broadening top. These are not a common pattern and many novice technicians confuse them with the more common broadening formation. The main difference between these two patterns is the volume piece of the puzzle. On the symmetrical, right-angle broadening top there will be irregular and unusually high volume on the creation of the pattern. Whereas, on the broadening formation the volume is the same as for any triangle or head and shoulders top pattern, meaning it diminishes throughout the pattern.

There are higher highs when the pattern is being formed and it looks similar to a head and shoulders pattern during the creation. However, if you see the volume side of the puzzle it will not diminish. I prefer head and shoulders patterns with spiking volume on the left shoulder that slowly diminish throughout the pattern so it is easy to distinguish the difference from broadening patterns.

In addition to the larger pattern, a small 1-month symmetrical triangle with diminished volume on the creation of the pattern is forming. Interestingly, the bottom line on the symmetrical triangle is also the third fan line and it gives a precursor of upcoming events. The small triangle and the third fan line breakout are in the $35.50 area. The breakout on the larger formation is in the $35.00 area.

I anticipate a downward move to the $27.00 area eventually. The long-term 20-year trend is in the $16.00-$17.00 area and, unlike so many other Dow components, it isn't likely to reach that support line.

Andrew Hetherington

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

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CHART ANALYSIS

American Express ... Membership Has Its Rewards?

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