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Hi DT,
Saturday, November 15, 2003, 9:55:26 PM, you wrote:
DT> In the N100 market, the serious Sell signals appeared on Nov10
DT> Close [not earlier] If they were short signals also is a matter
DT> of further discussion.
November 10 (last Monday) is also the exact date I went heavily
short. The signals I'm talking about were only short term, not for
any reversal of trend. No "this is the end of life as we know it"
signal, just a "we have a *significant* chance for a severely lower
market on Tuesday with a pretty low risk if we take a Monday entry",
and sure enough that is exactly what we got. That's what it's all
about: significant chance of an immediate strong move in the
direction you are going to speculate in, while at the same time a
greatly diminished risk of a big move the other way. I know of no
other trade criteria that I am really interested in when it comes to
speculation (as opposed to an investment). ^_-
(By the way, the actual signals came from the individual issues, none
of which had an inside day on Monday like the ^225 itself did, albeit
with a poor close. You have these stocks, courtesy of my weekly
updates; take a look at 8601 and 8604 and 8306 8307 and 8403 -- to
name five -- to compare *their* action Monday with the action of the
index itself. You will see the market told its tale not so much in
the index, but in some of the important components -- banks are
weighted very heavily in Tokyo.)
And, take a look at the rise line (rest of the week) that followed
those collapses on Tuesday in *every* case. If this isn't just
begging for collapse resumption, I never saw anything that was. This
is basic, really basic, swing trader stuff. You grab that short
windfall, then you WAIT, very patiently, for a re-entry off the
bounce (a real gambler, which I don't consider myself to be, would
have re-shorted on Thursday or Friday). But another entry short is
likely, and probably this Monday, although I will want to see the
follow through, if any, after what is sure to be a rather ugly open.
DT> As for the [ambiguous] H&S, it is out of any statistics the last
DT> months, even if it is fully formatted... All my !!!!!!! if you
DT> "saw" and trade the last leg before the formation !!!!
For me, H&S was an easy expectation after 10/24. (Note: A well
formed H&S was certainly NOT visible 6 bars ago. But the expectation
that one might develop was there since 10/24.) It was only an
expectation until last week, but it did play out exactly as I
expected, and since I played the market that way, it was great. I
did expect it had a good chance of developing, and here it is.
Sometimes I get them right, believe me. I also miss my share, too, of
course.
But, to wit:
Have a look at ^225 volume over the past 3 months. It is a screaming
*classic* potential H&S setup. The left shoulder (up to the
September high) is on huge volume, particularly compared to seasonal
volumes and volumes of only several months earlier. These were the
same volumes that could only *scream* long in late spring and early
summer. If one did not see these volumes beginning in June, and get
on the train, one belongs in a mutual fund, IMO, or in the bond
market as a coupon clipper. This is as basic as it gets, and if one
missed this run up on the long side, well, it's back to a serious
re-read of Edwards and Magee, maybe with a written test at the end.
^^_^^
Now, take a look at the "head" (October high). Volume is distinctly
less on the peak than *either* of the bursts of volume that comprise
the left shoulder. A H&S is certainly not a done deal at that point,
but that collapse on 10/24 was a fire alarm, my good friend. The
sprinkler system triggered that day (we talked about that day on this
board, remember?), and I started looking for places where fires might
be inclined to start. I don't think it's a leap of the imagination
to surmise that A) the market is still full of believers, so B) we
might get a bounce right back up off this big down draft, and C) that
down draft itself might be a sign of fatigue on the long side, and
the subsequent bounce high might be a trap for longs. Does that seem
too difficult to imagine?
Now that the right shoulder has formed, have a look at the volume
there. It's pathetic in comparison to both left shoulder and head.
Not once in the run up of the right shoulder has volume even
*touched* the 50-day SMA. In fact, starting on about 10/24 --
there's that date again -- the 50-day SMA of volume has gone into a
decline, the most noticeable decline of volume in many, many months.
Quite simply, 11/4 & 11/5 look like exhaustion highs to me, and the
formation is now eloquent in both its clarity and classic design --
so there. ^_^
In any case, 10/24 definitely brought a potential H&S into my mind,
and I was looking for the formation to complete, I traded it that
way, and it has. I doubt if I'm the only one to have done so.
Thank you for saying it was a good call. Sometimes I manage to get
them right. ^^_^^
Can this neckline hold? Of course. I don't think it will, but it
sure might. But we are going to have to get some serious volume back
in here. And foreigners became net *sellers* in Tokyo last week for
the first week since Dylan went electric (sorry, you young guys just
probably won't get that one). ^^_^^ Somebody besides me sees the
forest for the trees, I think.
Best,
Yuki
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