Reversal Versus Consolidation
Observing reversal is somewhat predictable based on the broader markets; a starting point in analysis can be developed. Many stocks do follow the index-based market represented by the DJIA, S&P 500, and NASDAQ, for example. So to some degree, stock reversal may be considered in light of the condition of the market as a whole.
Even so, it is not safe to assume that a specific stock is undergoing reversal merely because the overall market appears to be doing so. The interpretation of index movement is flawed for many reasons, including the distortions that index calculations cause. Due to weighting of stocks in the DJIA, for example, three companies account for more than 27 percent of the DJIA movement. This makes ...
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