Transports to Tumble? And Take Down the 500?

February 25th, 2013

by Chris Kimble

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I am going to get "Very Picky" on this Transportation ETF (IYT). Doji Star or Engulfing Bear patterns can often signal highs in any asset, especially at market highs or at resistance.

The chart below reflects a Doji Star pattern back in 2007 at (1), resulting in a 25% decline in a few months. An Engulfing Bear pattern took place at (2) in 2008, resulted in a 65% decline. A Doji took place in 2011 at (3), resulting in a 30% decline. Each of these declines impacted the S&P 500.

This past week another Doji star pattern took place at a resistance line where prior declines got started! The trucking index, which lead the 500 index down in 2011, is breaking down again! (See post here.)

Could last week's "Doji Star pattern at resistance" foreshadow that a decline of at least 25% in this key transportation ETF is about to take place? Will it be different this time?

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