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Nothing to do this weekend\?

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It's unlikely that all of our subscribers have nothing to do this weekend, but here's a trick if you want to let the better-half do the last minute holiday shopping without you! Tell them that right now you've got way too much technical analysis to do. After all, we've got tax-loss bounce patterns to be looking for and next years gains could well be in the balance of how I get started come January.

It's also a perfect environment to be looking for reverse head and shoulder pattern. Just as a point/figure chartist uses vertical counts and statistical studies to lay out some longer- term bullish price objective, the bar chartist loves the reverse head and shoulders pattern to find some bullish counts of their own.

Apache Corporation - $1 box

If I hadn't scribbled all over the above chart of Apache Corporation (NYSE:APA) you'd probably see what looks to be a potential reverse head and shoulders pattern developing. What I like about using both p/f charts along with bar charts will be found here. Notice the "low pole warning" signaling a potential longer-term shift in supply/demand. The strong follow through after a brief bullback. The follow through from $47-$55. Then the backfilling right into bullish support (blue +) and now the recent buy signal at $50 and creation of our current bullish count column. The "first buy signal off the bottom" gave a vertical count of $74. I put that in the back of my mind. Right now the X column that is building is what I will eventually use until a sell signal is given. Now look at a bar chart. The potential reverse head and shoulders really shows up.

Apache Corporation Chart -

I'm a little more conservative with my potential "reverse head and shoulders" numbers. That way, if the trade does work in my favor, then I'm going to sell a little too soon. The objective as I have drawn it out with a sustained move above the $54.43 level would be about $68. If we get a bullish vertical count from the point/figure chart anywhere close to $68 then I think I know what traders might want to be doing with APA above $54.43. Based on the p/f chart, a trader could be establishing 1/2 bullish positions right in here, then add to full on a move above the neckline.

Jeff Bailey
Senior Market Technician
Option Investor

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