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August 14, 2009 / Jeb

SPY Chart Analysis Double Bottom Turning Point

Double bottom turning points are a common technical pattern but hard to verify until a reversal in trend is observed.  Heavy volume around the first bottom and then lower volume after the second bottom shows the selling zeal has calmed and demand will push shares higher.

It is important to approach double bottoms and be patient to make sure the price confirms the double bottom as I will show later with the SPY (SP 500 ETF) chart.  As Bernard Baruch said, “The person who tells you that they sold at the top and bought at the bottom is a liar.”


Notice the high volume at the first bottom at Point A and the above average but lower volume at Point C.  This could be a tip off of a double bottom.  SPY rallied from point C through Point B then made a return move to Point B’s level.  It wasn’t until July 15th when I gave the buy signal that there would be an explosive rally was the double bottom confirmed.  Moving averages are pointing up and this is a major trend change.  I expect a run up to 120.


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