Ten-Year Chart Shows "Big Picture" Price Pattern

I (RAH) like to use a ten-year chart to study the price pattern of any security or commodity. With the ten-year period, I can see the "big picture" including long-term trends (up, down or sideways), price cycles, support and resistance levels, bubbles or collapses.

Most investing articles that I read use one or two-year charts to show a stock's recent price pattern. With a short-term chart you see the current price trends and action, but you don't know how these short-term fluctuations fit in with a longer term pattern.

For example, the INSIDE WALL STEET page in BusinessWeek (November 26, 2007, page 109) by Gene Marcial includes a nine-month upside chart for Owens-Illinois (OI) with the title RELENTLESS PROGESS. His article called Owens-Illinois Is Streaking Ahead is very positive about OI's fundamentals and leaves the impression that OI should continue on the upside.

But when you plot the chart of daily closes for ten years, you see a very different picture. This long-term chart shows that OI is at a key resistance level, suggesting that the stock may slow its upward path. So instead of a relentless upside, we may have a slowing or topping upside.

No one knows for certain what the stock will do, but the two charts lead to two different conclusions. And in this case, I prefer to take the cautious route and conclude that the current Owens-Illinois upside is coming to an end.

Related Articles:

Owens-Illinois Faces Resistance
Price Chart Primer
Price Patterns - Resistance Levels Are Barriers to Price Upsides

Posted November 23, 2007.