Goal for Coeur's H&Shoulder Bottom

[xzorro]

Recently I saw an interesting report from Clive Maund on the web-site of Gold-Eagle.com regarding Coeur d'Alene (CDE). The main part of this report is regarding the bullish Head and Shoulder Bottom formation in the CDE chart. This Inverse Head&Shoulder pattern has started in mid 2000 and has broken out early August.

Maund calculates a minimum goal for this IH&Sh pattern of 7. However, when I am doing this exercise using the well established guidelines for the measure rule, then I can only calculate a considerably lower goal of approximately 3.9.

How come ? Maund has been using a log chart. As such it is quite OK to use log chart especially for LT applications. However, take good care for calculation of the goal of the pattern !

Let me explain. If you use a linear chart then you calculate for IH&S pattern the goal by adding the difference between the head and the neckline to the neckline (at BO point). Then people tend to this visually instead of taking the numbers from the chart. Doing that visually is OK when using a linear chart but if you would use a log chart then you calculate a much too high goal for IH&S pattern.

So, I calculate a much more modest goal for this pattern. In fact it looks like that this IH&S goal has already been achieved. Of course, that does not exclude further upside potential. In fact the computed Price Objective for Point-and Figure chart is 8.0, however, what is the reliability of that Price Objective is (for me at least) fairly obscure.

Charts:
CDE on Log and Linear paper. Charts: courtesy StockCharts.com

Note: Caveat emptor