Centennial Coal - going down in flames?

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ASX:CEY Centennial Coal Ordinary closed today in Australia, Thursday 13th November 2008, at $2.69

The Head and Shoulder measurement formula (vertical red lines on chart) suggests a minimum price target of $1.29 over the next days or weeks. It could take months, but I doubt this because the current downward thrust is gaining force so rapidly. Also, it has already completed its pullback to the neckline and has now resumed its downward push.

The $1.29 forecast level is a minimum expectation. On the way down to this price level expect some counter moves upwards.

Readers of this blog will have undoubtedly noted the significant number of Head and Shoulders patterns appearing in these posts.

I consider the H&S pattern the most significant pattern in technical analysis, and when it appears – especially in abundance on the charts of so many issues – I give it great respect. It is a pattern, when correctly identified, which has considerable predictive value. Many issues which are the components of global stock markets have been producing this foreboding pattern.

This was also the case in the 1929-1932 Bear Market which ushered in the Great Depression. Many H&S patterns appeared in the charts of the issues of that most painful period of modern human history.

Does this mean that we are in for another Depression? The possibly cannot be dismissed out of hand. At the very least I believe it means we are in for a most severe recession. But who doesn't know that already?

Good luck to one and all.

James Leo Donoghue

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