The Chart du Jour
Back on January 24th and again on August 3rd, we forecast that Lucent would reach a downside price target just above $40 a share. It was at this level that we saw the best Fibonacci rhythm descending from the December 1999 high, and it also represented a 76.4% retracement of the September 1998 - December 1999 advance.
Our prognostication of achieveing 40 1/4- 40 1/2 was indeed fulfilled, but since that point, Lucent has continued its slide. This has prompted at least one reader in our chat room to query what we think now.
Well, the first thing that we can say is this: By breaking what should have been good Fibonacci support so easily, Lucent may be giving us a leading indicator that what we are dealing with here on the broader averages is a true Elliott 3rd wave down instead of merely a C-wave of a corrective period.
Second, there are of course no absolutes in Fibonacci analysis. For every targeted Fibonacci extrapolated high or low that appear relatively "tight" in measuring a chart pattern's imbedded rhythm, there are usually at least one or two even more extreme levels that also make a chart rhythm "fit." Although we would have expected more support in the 40 1/4- 40 1/2 region, we were also bearish the market overall, and previously forecast the general market to make a significant downside reversal in the Sep 4-13 time window, and it has. This then leaves us with the next level of support for Lucent at approximately 31 1/2 -32 -- a region that represents a Fibonacci 90.9% retracement of the 1998-1999 advance.
After that, and IF it is fair to deem the Lucent chart pattern to have been a huge head and shoulders top (a la Apple Computer now), the next target basis Edwards and Magee analysis would be at approximately $19 a share -- (the head high =$84 3/16; neckline below the head = $53; distance = approximately $31; target from break of the neckline at $50 = $50- $31 = $19 per share). Now there would be a real bear market.
For those that tried to bottom pick Lucent at $40 1/2, our apologies. Maybe it's best to cut and run out of any long position. For those that read our subscriber-only analysis, we hopefully have been bearish enough overall to compensate.
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