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September 4, 1994
In May, 1994 we recommended adding to long-term favourite Coca-Cola (KO) at 20.13 (monthly chart below). After an extended advance, why buy more & why at 20.13?
Since the 22.69 high in September, 1992, Coke formed a high-level consolidation which became a Symmetrical Triangle (ST), defined by converging upper & lower trendlines.
ST’s usually indicate a pause in a trend, not a reversal, so odds favoured an upside resolution to the triangle.
Once the most probable direction was determined, the question was at what price do we buy? The lower up-trendline was at 19.50 in May, 1994, & charts indicated support at 20. Controlling greed & any egotistical desire to pick the exact low price before any anticipated rally (& risk missing the entire move), 20.13 (just above support at 20) was chosen. Most importantly, 20.13 was a low-risk entry point because any close below recent lows would invalidate our scenario & allow exiting the trade with a very small loss.