Securities Research Services

Tuesday, July 26, 2005

Pulling Back, but Weekly Breakout in Tact

Relying on the weekly charts we have to make the assumption that weakness experienced at the current level is nothing more than minor profit taking and consolidation. Surely shorts are being sucked in at these levels, but it is precisely this type of reaction that can and does propel a market higher. Shorts try and pick a top (a very difficult endeavor indeed) and when bulls retake their ground shorts cover their positions at a loss and the market propels higher. Again, the weekly breakouts we highlighted last week have not been compromised and technical indicators do not show serious distribution taking place yet so for the time being the risk/reward ratio favors the long side.

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