a historical perspective part 1

Its been a bit of a frustrating week, so I thought I would do a bit of homework and see if I could explain what is going on from a technical standpoint. The end of the story explains how hunter hall fits the current action, if you stick with it.

This is a chart going back to before the 'bear' began. On it I have marked what I consider to be 4 of the important support/resistance levels. As you can see I tag important turning points and consolidation points in the past, and then extrapolate them into the future. I have circled and colour coded the 'wiggles' for you, which should illustrate "why".

The yellow lines are the ones that are relevant at this time, and as you can see they are based on important inflection points which led to the lift off a year ago, and more importantly to the biggest counter trend rally in the decline, where we bounced off 1.24 and nearly broke $2.



For those of you who think I am talking double dutch or who dont really have any faith in this TA stuff, I have prepared another chart, on which I have superimposed the fibonacci scales which hopefully you are getting used to by now. If you notice I start them all at 40c, it is an important level from long ago, which is also the genesis of the recent low.

The point however is that you can see from the old scale from before the rise that BRM followed the fib price levels closely, that it did so during the rise, and that has been doing so again since the low. You can also see that fib price retracements are based on matching up current price levels, with old price levels. You should also be able to see that the yellow lines, where we are at the moment, are particularly significant.



Now if you have a little faith, I can tell you that every trading house around has a technical analyst, and that they draw charts just like the ones I am drawing for you, and that they make recommendations to the fund allocations committee on what the future upside and downside of various equities might be, based on the price patterns demonstrated by a range of both equities and their sectors.

In our case, it seems that Hunter Hall, being a significant stakeholder, has formed an opinion and are acting on it, which you all knew anyway.

The last chart is a zoomed version with an extra fib scale on it. From this it appears that the hunter-hall analysts have concluded that the upside for BRM is represented by the smaller scale which I have inserted in the centre of the chart, and that they have put it to their committe that they should exit or reduce their position based on the premise that the 200% extension from the low is 1.27/8, and that they should sell down hard to around 1.21 (which you know to be another fib level of importance). There may be additional reasons that they want to do this, such as redemptions or sector rotation, or whatever, but it appears that they have accepted the technical evaluation.

My analysis of what is happening is based in part on the shape of the last 4 candlesticks, which show that we move up, and are met by steady, planned selling, resulting in the long skinny sticks at the top of the candles. There is no sign of forced liquidation or duress.



The more interesting part of the analysis is the series of rising lows in the last few candles. This is a small scale but never the less classic rising triangle, where the steady buying pressure is meeting the selling pressure, soaking it up, and advancing into it.

One of 2 things will almost certainly happen in such cicumstances :
a) Hunter-hall will run out of stock to sell
b) Hunter-Hall will exhaust it's will to sell (perhaps because their tech analyst notices the pattern of rising bottoms into level tops at a former resistance level)

When one of those 2 things happens, we will see a rapid move up which is caused by a shortfall in supply of this stock, in the face of unmet demand. In general this happens as the trend line from the bottoms get close to the tops line.

If you have followed the logic so far, you would obviously argue that if I had faith in my analysis, my 'fearless forecast' for BRM should be that it will advance to the purple lines on the first chart, and you would be right....

and I hope the hunter hall guy is reading this too!