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Hi Gary,
Friday, November 21, 2003, 9:18:10 AM, you wrote:
GAS> Perhaps Yuki can tell us what warning signs were here to
GAS> indicate the stock wasn't ready to rollover.
One for sure that strikes me:
Throw an 18-day SMA on there. It's one I use along with 50 and 200.
Why 18 day? Lazy, probably. It's the one that used to be in all the
commodity books years ago. I liked it then, and I've never stopped
looking at it.
Now, what does it tell us vis a vis the Nikkei and BA in these
formations?
Well, with the Nikkei this line had pretty much gone flat for 6 weeks
or so, as price started jumping wildly on both sides. But by the
time I thought there would be a rollover worth shorting, I had two
bars below that line (high lower than the line) *and* the line had
actually rolled over itself. With BA, at the end of that "H&S",
price cuts through a clearly rising 18 SMA line. Not only is it
rising, but it's beginning to diverge positively (just barely, but
easily visible) from the 50 SMA line. We do get two bars below the 18
day line, but the second bar is an outside day reversal closing on
the H. It's all enough to make me strongly wonder about the wisdom of
shorting there for sure. (You know, it's counter trend here, and if
there is any doubt at all, I would certainly pass the trade.)
Finally, and I think most importantly, look at the percentage drops
in the Nikkei from LS to NL and from H to NL. There are a couple of
10 percent moves there. TEN PERCENT, folks, and they happen in two
or three bars. This is not your grandmother dumping the 100 shares of
AT&T she bought back in '38 and forgot about until yesterday. This
is a bunch of people liquidating size. Look at the volume spikes on
these days. Then look how volume evaporates on the RS run up.
With BA, I see the percentage pullback, but I see it over a much
greater number of bars, and I don't really get any sense of anybody
beating the door down to get out. There is some nervousness on and
just after 7/15, but on the head volume is pretty somnambulant --
nobody is in a hurry to leave here, and there is no heavy churning as
stock moves from stronger hands to weaker hands at the head. This
whole formation I would call a rising wedge, not a H&S.
Give me two bars below the 18 day and I might want to short it. ^_^
Anything to do with airlines, which are on the front line of exposure
to terrorism, makes me kind of airsick. ^_- Besides, this ascending
wedge looks like it's about ready to end -- we're starting to get
some interesting RSI divergence now. I'd bet you can buy this again
ten percent below the 50 in the next 50 bars or so. It looks like it
might be ready to go. But in a rising market it's best to be very
patient, and let the thing really show you lots of confirmation
before placing a downside bet.
Best,
Yuki
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