The Wrong Way
Problems arise when the technician gets impatient or tries to force meaning on the chart that the market has not put there. In Figure 12.3, the COMEX gold market was in a steady downtrend until it dropped sharply in early July 1997. The price action that followed appeared to be a rising flag, which would be an expected pattern at that point. On July 15, the market broke below the flag in what looked like a continuation of the bear market. The problem with this analysis was that a sixday flag pattern that retraced about $9 was not sufficient to correct a decline that was three months old and $40 long (based on the last intermediate peak in May).
Figure 12.3. COMEX gold early
Figure 12.4 shows the same chart a few weeks later. ...
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