After rising from 27 to 64, WorldCom Inc. (WCOM) entered a trading range between 55 and 63 that lasted about five months. In mid-June, the stock briefly broke above 62 (red ellipse), marking a false breakout. However, this didn’t last long—just a few days later, a downside gap (black arrow) invalidated the breakout. The stock then broke below the 55 support level and dropped to a low of 50 in August 1999. This is another example of support turning into resistance: after the drop, the price rebounded twice near the 55 level before continuing to fall. While this doesn’t always happen, the return to a new resistance level gave bulls a second chance to exit and bears a second opportunity to enter the market.

Lucent Technologies (LU) formed a trading range that resembled a head and shoulders pattern (indicated by the red ellipse). When the stock price broke below the 60-point support level, there was virtually no time to exit. Although a long black candlestick indicated an opening price of $59, the stock dropped so quickly that it was nearly impossible to exit above $44.

In hindsight, the support line could have been drawn as an upward-sloping neckline (blue line), with the support break occurring at 61. This was only 1 point higher, but traders needed to act immediately to avoid a sharp decline. Notably, the lows aligned well with the neckline — an important factor to consider when drawing a support line.

After Lucent's decline, a trading range was established between 40.5 and 47.5 for nearly two months (highlighted by the green ellipse). The resistance level of this range was defined by three reaction peaks around 47.5. The support level was less clear but appeared to be between 40 and 41.

In the second half of February, some buying interest began to emerge around 44. Note the series of candlesticks with long lower shadows, also known as hammer patterns. Following that, on February 24 and 25, the stock formed two upward gaps and eventually closed above the 48-point resistance level. This clearly indicated that demand was exceeding supply.