Our Mystery Charts? Too simple?
by John Sweeney
Answers to April's Mystery Chart contest ("No chumps and Mystery Charts," Stocks & Commodities,
April 1990) were pretty terse, although contestants had no trouble identifying the weekly heating oil price
chart. The brevity may have been from the simplicity of the situation: a breakaway gap to the upside and
the approach to support on the downside. The question was: What next?
Our winner, Willis Brewer of Metairie, LA (Figure 1), barely beat out Bob Bronson of Morrison, CO.
He would have shorted the breakthrough of the old support line (A) and covered at the uptrend line (B).
This is simple and effective, as the succeeding action shows (see Figure 2).
Just because Bob wasn't immediately right (Figure 3) doesn't mean he might not be right in the future.
His expectation of a 50% retracement coming off a spike to such a level has been rare in my experience,
but oscillations between 58 and 70 before punching lower wouldn't surprise me. I also thought his
curvilinear trend lines more accurately caught the thrust of the price movement than straight lines would
Bemused thanks, too, go to Steven Bayern of Laurel Hollow, NY, who aptly traded the upside gap but
provided no hints on how to handle the downside of the spike! Joseph Barics of Farmingville, NY, sent
in an analysis well worth reading. However, he couldn't identify the contract and therefore couldn't get
the data into his machine for analysis. Showing the spunk of a true trader, he approximated the numbers
from our chart and typed them into his machine before applying a neat piece of regression analysis. Look
for this in a future issue.