One of the most popular chart patterns among technical analysts is what they call a head and shoulders top.
Since early 2006 the FTSE 250 mid-caps index has traced out just such a pattern with left and right shoulders formed by trading between 9,000 and 10,000 and a peak in the summer of 2007 at 12,282.
The theory goes that if the neckline is broken the index will fall by the height of the head. The implication, for chartists, is that if the FTSE 250 falls decisively below 9,000 (it is currently 9,554) it will be vulnerable to a further steep fall, possibly by as much as 3,000 points to around 6,000, a level not seen since 2004 and first topped way back in 1999.
Fundamental data hard to read
Many investors are dubious about the value of charts. On the other hand it is not easy to make sense of much fundamental data.
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