Q: How can I back up my Favorite Charts, for security purposes or to transfer to another computer?

A: Right now we do not provide a way to backup the Favorites list directly. Currently this list is stored in "cookies" inside of your web browser. Windows Internet Explorer users can back things up indirectly by backing up your "C:\windows\Cookies" directory; however, we don't recommend that because restoring those files may affect how other websites operate.

An alternate approach is to store each chart in the "Favorites" feature of your browser in addition to storing in the StockCharts.com "Favorites" list. All of the charts on our site can be bookmarked by using the "Favorites/Add to Favorites" or "Bookmark/Add Bookmark" command on your browser. In addition to providing you with a backup that way, there is no limit to the number of charts that can be bookmarked and you can organize them however you want.

You can also use a site like http://www.mybookmarks.com or http://my.yahoo.com to create on-line lists of bookmarks that you could access from any computer.

Soon, we hope to use a centralized database for storing Favorite Charts instead of the "cookie"-based technique we are using today. There are many advantages to a database approach; in addition to giving you much more control over the order and number of charts in the list, it will allow you to access your list from different browsers, different computers, and different locations. When will this be happening? It won't be long now!

Hope this helps!
Chip Anderson

Q: If the Dow Industrials ($INDU) closes above 10,700, does that break the Diamond formation? If the Dow is still in the Diamond formation on the last day (around July 15) would the resolved direction be more powerful than if it broke out either way now? If the Dow Industrials break the Diamond, what are the potential target levels?

A: Many analysts, including my good buddy Richard Rhodes, believe that the Dow is tracing out a Diamond formation. I cannot argue with this assessment, for it is plain to see on the chart.

Diamonds are rare formations, yet they occur nonetheless. Edwards and Magee describe the Diamond as a head and shoulders pattern with a "V" shaped neckline. Looking at the current Diamond formation, I can certainly see the head with a peak at 11750, the left shoulder peak at 11366, right shoulder peak at 11426 and the neckline with support around 10,400. A Diamond can also be viewed as two triangles: an expanding triangle (broadening formation) followed by a contracting triangle (symmetrical triangle).

It would appear that we are currently in the symmetrical triangle portion of the Diamond and a breakout (up or down) will determine the direction of the next major move. While Diamonds are usually reversal formations, they can also be continuation patterns. Symmetrical triangles are usually continuation patterns. A break above the trendline extending down from 11750 would be bullish. A break below the trendline extending up from 9732 would be bearish. Also keep in mind that any break should be accompanied with an expansion of volume for confirmation. Without confirmation on volume, the pattern could extend for a few more weeks or months.

Resolution of the Diamond
It is difficult to predict when the Diamond will be resolved and how -- we must judge the validity of the breakout when it occurs. Diamond patterns are not known for their symmetry, but there is the possibility that it could extend for a few more months. This might entail another low around 10,000 followed by another high around 10600. The longer this pattern extends, the more dramatic the resolution is likely to be. A break soon could lead to a more controlled move (up or down), while a later breakout might lead to a more dramatic move. Usually, the bigger the pattern is, the more dramatic the subsequent move. Currently, the right half of the pattern has formed a very nice symmetrical triangle and I would venture to guess that when this is resolved, the Diamond will be resolved.

Diamond breakout projections
The projected breakout from a Diamond is the distance from the top to the bottom of the formation (11750 - 9732 = 2018). Incidentally, this is also a popular projection method for a symmetrical triangle breakout. If the trendline extending up from 9732 were broken at 10,400, then the projected decline would be to 8382 (10,400 - 2018 = 8382). A decline below 10,400 would also break the trendline extending up from November 1994. If the trendline extending down from 11750 were broken at 11100, then the projected advance would be to 13118 (11100 + 2018 = 13118).

Other breakout projections
The above projections may appear rather extreme, especially to the downside, but they are entirely viable. The other possible projections concern Fibonacci support levels, historical norms and previous consolidations.

• A 62% retracement of the advance from 7400 to 11750 would take the index to around 9053.
• A 50% retracement would take it to 9575.
• There is support around 9200 from the May-98 resistance and Jen/Feb-99 support. Given the market's penchant for round numbers and the tendency to overshoot, we might just call it 9000.
• In his book, the Encylcopedia of Chart Patterns, Thomas Bulkowski found the most likely decline after a Diamond reversal to be around 20% and the most likely advance to be around 15%. His advance estimates were based on Diamond bottoms though, not continuations.

Cheers,
Arthur Hill