We were just regaled with the fine little book Plato and a Platypus Walk into a Bar… in which one joke invites one to believe in his eyes or … Friend caught in bed with friend’s wife says to friend, who you gonna believe? me or your eyes? Well, who you gonna believe? Your deep distrust of the present rally, or the chart. Not that the chart is telling the truth. The nature of bull traps is that they look like juicy opportunities until you discover your foot has been gnawed off. But, as we have remarked, like Charlie Brown and Lucy and the football you have to kick that ball because the one you don’t believe (or kick) turns out to be Microsoft. Fortunately in the edwards-magee methodology there is a way of dealing with situations you are suspicious of: scale in. And you can even scale in to the scale in. The capital commitment to an issue is divided into tranches — 3 to even 7. So if the bear eats your foot off in a bull trap he just ate one tranch. Whereas if it turns out not to be a trap you commit other tranches to it. This may be one of those situations. Lots of issues showing breakouts and a bear market rally looking a little aged. Nonetheless here is a clear buy signal from what has the appearance of a mutant Kilroy (H&S) bottom. Why are we suspicious of banks?
KBE, breaking out according to the chart. Would you trust a bank with a few billion dollars?