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October 3, 2000

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Subject:  Re: Charts DO matter, Dammit!!
Author:  Eldrehad

lenticular wrote:

"After INTC announce its earnings shortfall it broke all its previous RECENT resistance points. Looking at the chart now (plus the time of year) makes me fairly confident that INTC WILL at least break 40, and maybe head down to 35 bucks!!"
Hmmm... Let me see if I understand this correctly...

Support is some point on a chart that is akin to the minimum of a trading range of a stock, while resistance is the upper end of the same range. Technical analysts would suggest that a stock normally trades in this range between the support and resistance levels.

Am I right so far?

Now, these technical analysts would tell me that when the stock hits the 'support' it's kind of like hitting the floor with a ball, the price will bounce back up. If it hits the resistance, it's like hitting the ceiling, and will bounce back down.

Oh wait, I'm missing something... the stock can also break through the support (floor), in which case it will continue to drop. Likewise, it can break through the resistance (ceiling), in which case it will continue to go up.

So far so good?

Now... let me make sure I'm getting this right because the technical analysts out there seem to think this is REALLY important stuff... the stock could hit the support (floor), and it will bounce back up (like the ball off the floor) or it will crash through the floor and continue to go down. So... that means whenever a stock hits its support it could either go up or go down. The stock could also hit the resistance (ceiling) and it will bounce back down off the ceiling, unless of course it crashes through the resistance (ceiling), in which case it will continue to go up.

So, let me summarize, when a stock hits its support, it could either go up, or go down. When a stock hits its resistance, it could either go up or go down. And of course I forgot to mention those times between the support and resistance when the stock is free to travel either up or down between the support and resistance. So basically, at the support, at the resistance, and in between, the stock could either go up, or go down.

Boy, I'm really glad these technical analysts are around to help me understand all this stuff! I don't think I could have figured out that stocks could go either up or down without their expert guidance!
Have Fun!


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