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<SPAN
class=321165917-20112003>Louw,
To understand market
behavior we must first understand exactly what the bars on a chart are telling
us.These bars are a road map <SPAN
class=321165917-20112003>which offer insight into the markets underlying
psychology. Markets are fueled by 2 simple human emotions.......Fear and
Greed. When a market is rising there are simply more <SPAN
class=321165917-20112003>Greedy participants then there are Fearful
players. The buyers believe that they will have the opportunity to sell their
shares for more than they have paid for them and so Greed instructs them to hold
on or buy more. After a time the Greedy become Fearful that the Market will try
to take some of their money. As this Fear takes hold the holders begin to sell.
This selling in turn fuels Fear in other holders who in<SPAN
class=321165917-20112003> turn
begin to sell shares.
<SPAN
class=321165917-20112003>When volatility is high it is simply because there is
little consensus amongst the players. The Greedy are confident and so are the
Fearful. In your example you have the Greedy pushing the stock up but , as
seen by the increasing volatility, the Fearful are growing more afraid. IMO this
is a scary time to get involved. If the Fearful gain control it will get ugly
fast. In your example you will note that the sell
offs happened quickly while the march forward seemed more orderly. This would
indicate to me that the fearful are gaining control while their own greed has
simply not yet allowed them to sell with vengeance. Instead I prefer to
see the battle take place with decreasing volatility. Once one side eventually
asserts itself then the volatility will increase. At that point (the break of a
converging triangle for example) it is far easier to get in on the right side of
the trade. This process is repeated in pattern after pattern. Think of a
cup/handle. The buyers push the stock up the right hand side only to be met by a
fearful few who form the handle as volatility decreases. Then the buyers gain
control fueled with volume pushing the stock higher on increased volatility and
the break out fuels more optimism and higher
prices.
Trying to put
statistical probabilities to price patterns is challenging at best and certainly
at the mercy of the particular data set studied. People make the markets trade
and their emotions drive their behavior. As technical analysts I think
perhaps we often try to make things more complicated then they need to
be.
<SPAN
class=321165917-20112003>my 2 cents
FWIW
Regards,
Jayson
<SPAN
class=453581615-20112003><FONT face=Arial color=#0000ff
size=2>
<BLOCKQUOTE
>
From: <A title=louwcoetzer@xxxxxxxxxxxxx
href="">Louw-Roux Coetzer
<BLOCKQUOTE
>
To: <A
title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Thursday, November 20, 2003
3:46 AM
Subject: [amibroker] Wedges
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial color=#0000ff
size=2>Hi there all,
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Just a easy question that is confusing me a wee bit ....What is the
technical significance of a "Rising Widening Wedge" against & with a
trend...see pic for example...is it the same as a "Narrowing Wedge " with
& against a trend ?
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Kind regards
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Louw Coetzer
<FONT face=Arial color=#0000ff
size=2>
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