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Showing newest 56 of 57 posts from June 2009. Show older posts
Showing newest 56 of 57 posts from June 2009. Show older posts
Monday, June 29, 2009
Friday, June 26, 2009
Visiting blog comments...
Just for the hell of it, I went to some blogs that are frequented by a pretty large amount of commentors. I did not read the comments, just the names. I found, compared to 1 year ago, less than a handfull of names that were commenting a year ago are still around. Congratulations to those who are still present, you know who you are.
I find, with each passing year, the turnover rate of market participants greatly exceeds that of a large call center (one of the worst for turnover rates). There are very few techniques that prove reliable in all market environments. I am sure if you asked those who are no longer present to comment, they would agree.
Research....
Here, something to pass the time. Find the slope of each major channel and harmonics within each chart of the top 10 QQQQ components. Use the same slope to find the hidden channel within the ETF or indice that corresponds with that stock. Pretty cool stuff.
NASDAQ... Top Components...
I went searching for the components which make up the Q's. I have some pretty good information leading me to think the NASDAQ is in for a good hit to the down side. After finding this site, I pulled up some charts of the largest components. Some of these lines were drawn months ago, believe it or not. Most I just drew, but in any event, the charts confirm to my thought process (or vice versa!). Charts will now follow....
Thursday, June 25, 2009
Well, enough of that shit now!
The bounce I seen coming has, from what I see, run its course. It was a neccessary evil, to leverage up and compensate for the theta I have eaten for 3 months now! All options I took off at the SPY and DIA delevergae area have now been added back in, along with some additional put contracts. I have some cash on hand, but I am pretty heavily "in" the market as of this point, let's bring on some down side!
Wednesday, June 24, 2009
Down day, but a good day!
I added to all short positions today at the open. The SPY 89.07 and DIA 83.24 levels hit yesterday allowed de-leverage. The Q's have not de-leveraged in a while and there is a significant price discrepency between the NASDAQ compared to the DOW and S&P. I did de-leverage some of the Q's position along with SPY yesterday (since the Q's had a lot more to travel to their deleverage area). The majority of the capital raised with yesterdays selling of puts has now been moved over to the Q's position, which has a significant more return potential that either the DIA or SPY. I did close some DIA puts today also, but turned around and just fed that coin to the Q's. I have some coin on the side that I would like to get into these positions, but that will only occur if we see any further strength (or significant weakness followed bt moderate strength) until we hit the pre-defined reset levels. If some major weakness developes, I do expect one more significant bounce before my exits on these trades. That bounce will be initiated by the de-leveraging of the COMPQ/NDX/QQQQ. I will also have puts under extreme accumulation with that rise.
You may have noticed the Q's decline expected yesterday afternoon did not materialize. That was half-way expected. During this upward thrust (since March), the Q's have had more opportunity for deleveraging, and when the DIA and SPY simultaneously hit their levels, a bounce was sure to follow without the Q's getting their chance to deleverage. The following rise did happen though, which allowed me to compile more puts and I'll have to wait a little while to unload some Q
s puts. I do expect that level to be taken out by the end of the week however, and support a bounce for one more shorting opportunity before this market cycle is spent.
Have a good night!
Sunday, June 21, 2009
Saturday, June 20, 2009
Option premium sucking vampire!
So, another option expiration day has come and gone. Expectation of a range bound market on expiry day are typically over-exagerated. Markets move, and move really well, on expiry day, at least they used to. The one thing you can expect pretty uniformly is the premium, extrinsic that is, being sucked right out of option up until the closing bell. This is how the greeks work, a volatility drop just enhances its effectiveness. For all those holding options that expire in the next 3 months, not to fret, they were just collateral damage. Their extrinsic premium drop will be short lived.
You may have noticed I figured out how to email and post directly to Channellines blog site. This will greatly increase my amount of charts posted. To put out the disclaimer, I do not use these charts to actually execute trades from. The criteria presented in each chart however IS supported by my technique of trade. Which means, the recommendations presented should prove pretty useful for those who use traditional stops and balance risk/reward ratios.
Once this trade cycle is completed, I will be implementing some more techniques into the trading arsenal. They are not new techniques, they are proven. They are designed to use the same time proven techniques of the launch/de-leverage/reset criteria with a hedging effect to the primary fade trades. The end goal is to have the entire portfolio close to delta neutral at all times, thus decreasing draw-down. One technique, of six to be utilized, does have a traditional stop loss level. The risk:reward is approximately 1:2 with an extremely high percentage of profitable exit. It supports averaging in one lot, buying on weakness, and selling strength, yet, it is a momentum play to run with the primary extension. It is the most reliable way I have proven to "buy the dips" and "sell the surges" to date. The key is to not compound the position, for at the primary turn (when the fade trade excels), you will get stopped out, it is inevitable. Using uniform lots (per dollar amount) will keep that loss minimal, as compared to steadily increasing your lot size upon each successful completion of a momentum trade.
More details will be coming out when either A. this trade runs its course, or B. the last individual I have under contract actually decides to get things rolling (for they are scared to death to fade this incline, even though it is already half-way compensated!).
Till then, the dance continues! I would write a nice little story of shark livers, or whales, or penguins. Possibly even draw the Loch-ness monster on a chart (wait that has been done by a different blogger!). But, in the name of "keeping it real", I'll leave you with this song. I have put the lyrical phrases I like the best below.
"You spin my head right round, right round
When you go down, when you go down down"
"I know the storm is comin
my pockets keep tellin me it’s gonna shower"
"From the top of the pole I watch her go [down]
She got me throwin my money a[round]
Ain’t nothin more beautiful to be [found]
It’s goin down down."
"I’m spendin my money
I’m out of control
Somebody help me
She’s takin my bank roll.
But I’m king of the club
And I’m wearin the crown
Poppin these bottles
Touching these models
Watchin they a**es go down down
down down, down down"
Friday, June 19, 2009
ProphetCharts: $VIX
Major divergence in the MACD, Stochastics poised to rock the VIX. You want options? Bout as cheap as your gonna get'em for a while!
For the Web's best interactive charts, please visit http://www.Prophet.Net
Opening discrepancies.
Looking at the futures, where they were at 4pm yesterday (eastern), where there are now.... would you not expect the pre-market quotes on the ETFs be a bit higher? Something ain't quite right.
ProphetCharts: GS
A internal slope, hard to see, but there. Next chart is an hourly of GS, a little easier to identify.
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: $RUT
Same here with the RUT, short entry with good probabilities
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: $DJI
(Click on chart to enlargen and read written text)
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: CTXS
This one screams "short the hell outta me!"
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: BCE
Potential RSI channel break
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: BBY
Triple screwed (but not extended)
For the Web's best interactive charts, please visit http://www.Prophet.Net
ProphetCharts: AVP
I am testing posting charts directly to channellines. Seems to be working pretty well. I should be able to post many more charts with it being a less pain in the ass!
For the Web's best interactive charts, please visit http://www.Prophet.Net
Thursday, June 18, 2009
Option return projection
When selecting an option for maximum return on capital, when a move is pretty imminent, you can calculate your return when your target price is identified. The option chain below is of the Q's, July expiry. If your target, or reset level, is at 33.00, you know the guaranteed intrinsic price of the option at target. For instance, a 36.00 strike will be worth 3.00, a 35.00 worth 2.00, a 34.00 worth 1.00. Keep in mind, this is calculating intrinsic value only and low-balls your return. I would rather error by low-balling the return than exagerating it. This return assumes target is reached before expiry, the faster the target is reached, the more extrinsic value you will have and thus an uncalculated bonus return.
To calculate the percentage return on each contract, thus finding your best return on capital, you take the value of the contract (at projected target) and divide by the current option price. Like such (calculated target being 33.00)
37 Puts (37.00-33.00)/ 1.855 = 2.156 (rounded) for every dollar in, you will get a return of 2.156 dollars, or a 215% return on capital.
36 Puts (36.00-33.00)/ 1.295 = 2.317
35 Puts (35.00-33.00)/ .885 = 2.260
34 Puts (34.00-33.00)/ .405 = 2.470
Each option, whether "in the money" or "out of the money" has their own benefits and risks. An option bought closer to target will have more extrinsic value when target is reached, but will suffer more if the target is not achieved in time.
An option bought further "in the money" will have less extrinsic value at target, but will retain value better if the target falls short, thus giving you premium to perform a calendar roll.
The 36.00 put is giving a 231% return at target, this return exceeds the percentage of further OTM options, which decisively gives it the upper hand here. Typically, the further ITM you go, the less % return you will achieve, but have less risk if things do not go as expected. Further OTM options give no real advantage, unless volatility is extremely low and you can pick them up very cheaply.
To sum it up, right now, if you can nail a 3.00 move on the Q's and only get a 200% return, option prices REALLY suck at the moment!
Tuesday, June 16, 2009
Opening predictions....
Here is where great odds of us opening are:
SPX 890
DJI 8329
RUT 463
COMP 1736
DIA 83.52
QQQQ 34.46
SPY 89.41
Pure speculation, of course
CVH
The chart below highlights yesterdays exit, which I covered my short position. This type of behavior, once a reset level has compensated the trend is typical. A momentum play would have had me go long CVH once covering my short position. A momentum play requires strict adherence to stops, for there is no obligation by the market in your favor. Once proven wrong, you need to cut that loss.
Yesterdays exit on CVH had absolutely nothing to do with technical analysis. No channel, no trendline, no indicators. It was strictly by the numbers of the rolling average required to maintain a set percentage margin of profit. The ratio is universal in all things traded, and most things found anywhere for that matter.
Monday, June 15, 2009
Couple of things...
Sorry I did not get to comment on the existing channels in the last chart I posted. The bottom line... every turn, on every time frame can be seen as a channel hit of one type or another. The more converging channels you have at one spot, the stronger the reaction. This is where we are, at a strong area of convergence. A strong reaction to these channels should be expected.
I had a reader post regarding my comments regarding the expected fall in the ETFs because I was covering some of my shorts today (20%). I want to make it perfectly clear that channels, trendlines, oscillators, indicators, moving averages, etc, etc, are all speculative tools. The way I analyze using TA is pure speculation. I do not make or base any trading decisions upon speculation. I trade by the numbers. My methodical way of trading is like painting by numbers, it is clear cut, well defined, and does not leave gray areas for emotion or other human emotional or biased errors. I covered a portion of my short position today for one purpose, to free up capital and decrease my rolling cost average should we go higher. I still feel we are heading down, but what I "feel" and what I play are two entirely different things. I trade to make money, I speculate for fun and to kill boredom.
When the numbers match up with strong channel support/resistance, my beliefs are reinforced, yet my trade technique does not vary. I have 5 techniques of trade, all based on the same basic principals. Those principals are the rules the market will adhere to, without question.
Have a good night, and best of trading to you tomorrow!
Sunday, June 14, 2009
The rolling trade, cost effective with high return.
I will attempt to get back to my channel explanation of the previous post, but first a more time sensitive trade set-up. that is why we are here, afterall, to make coin, no?
The market has now captured the largest percentage couter-move on record. In comparison to the move up, it is not that large, but guaranteed. I will give an example here of how to exploit a move such as this using options without significant risk. It is what I refer to as the "rolling trade".
The purchase of August puts is preferred, but July should work fine here.
The trade involves establishing a significant "out of the money" put position and rolling the position up in strike on any significant market strength. For instance, If you were to purchase 10 July 35.00 strike puts on QQQQ, you would roll 1 option to the 36.00 strike on every increase of 0.10 of the underlying. The basic formula would be: (strike increment)/(options held). This give you the price increment (and percentage of the position), of the underlying, in which to roll your puts. In this case 1.00/10= 0.10. So you want to roll 1/10th of the position every 0.10 increase of the underlying. You will continuosly be putting money into the position, but capturing a higher degree of guaranteed counter-move as price increases.
The reset level does not move proportionately to the price of the ETF itself, it increase at a skewed rate which is slower. You are keeping your average "strike average" proportionate with the increase of the underlying, thus capturing a higher degree of return. This is not as confusing as it may sound, although, it is hard to explain via text!
When the time to exit has come, I'll be the first to let you know!
Saturday, June 13, 2009
Lines of intersection...
I will attempt to comment on each and every channel/trend line here at a later point this weekend, but no promises. In the meantime, here is the chart.
Friday, June 12, 2009
Inspirational comments, for the bear-kind ;-)
When all hope feels lost, and everything is down and out,that is typically the time you should be increasing your position, not bailing on it!
The markets record historical uni-directional move is in process now. The advantage of this is that it gives the largest guaranteed counter-move ever seen in the markets also. The magnitude of the primary move is almost impossible to accurately calculate. The counter-move, or compensatory move, is an exact science. The counter move is where the professional money is made.
In a logical sense, Joe Lunchbox is attempting to buy into momentum. Someone sells to Joe. When the balance of dumb money does not equate, which it doesn't in market extremes, professionals step in to balance the game (or un-balance, depending on how you want to look at it).
You, being somewhat informed, look at these markets and say "Who the hell is buying this shit???". The lay-person, on the other-hand, can not get in quick enough. If I had a buck for every person who asked me what to buy these last few weeks I probably would not be in draw-down!
Preserving capital these last couple of weeks, I have been rolling my strike positions, not compounding delta by accumulating contracts, but just maintaining delta. Gamma is my enemy at the moment, which will be resolved in a roll to July contracts.
Looking at purely intrinsic value, I am holding about 20% profit at reset. Rolling to July contracts will take the cost of the roll directly off the unrealized profit potential. In the end, whether 20% gain, even, or slight loss, I will look at fading the markets historical momentum move and coming out to trade another day nothing but a success. If I could get no more wrong, and still pull out profit, what else is there?
In a nutshell, there is no better time to take advantage of the largest guaranteed correction in history. "Out of the money" put contracts are exceptionally cheap, thanks to the extremely low volatility (yea, right!). If the underlying keeps going up, roll up your puts to the next strike, you'll book a slight loss for the larger gain.
The correction is on everyones radar, right? Well, it has been for a month, and most are tired of even looking for it. Many think the "consolidation" has taken place of the correction. Got news for you there, the party hasn't even started.
Step back from the ETFs and Indices. Take a look at the ever weakening issues as AAPL, GOOG, GS, and every small issue there is. The ETFs and indices are in the limelight, where else is there a better opportunity to decieve the public by displaying false strength? Next week should prove interesting. Have a good weekend, I'll attempt to post further this weekend.
Wednesday, June 10, 2009
GS, limit has done been pushed...
Let me start off with a few charts.
The first chart is the wedge on the daily chart. The pattern appears to be intact.
Here it is on the intra-day charts. This paints a slightly diffrent picture. It could have broken and closed to the underside of the same trendline. Support to resistance. Guess we'll see at the open!
As far as extension goes. Back-studying about 250 individual securities with daily volume greater than 2 million and greater than 20.00, only one has ever broken a 100% extension uncompensated... till now. GS has reached 105%, whatever smoke is being blown up peoples asses, I assure you, we are not going much higher, if any, before compensating this move.
The market reminds me of a song at this point. Most of the words can be fit to the market at this time, with some imagination. The market is most definately a ho!
Click here to listen (warning, one F-bomb ;-))
Lyrics to Don't Trust Me :
Black dress with the tights underneath,
I got the breath of the last cigarette on my teeth,
And shes an actress (actress),
But she ain't got no need.
Shes got money from her parents in a trust fund back east.
T-t-t-tongues always pressed to your cheeks,
While my tongue is on the inside of some other girls teeth,
T-tell your boyfriend if he says hes got beef,
That I'm a vegetarian and I ain't fucking scared of him.
She wants to touch me (Woah),
She wants to love me (Woah),
She'll never leave me (Woah, woah, oh, oh),
Don't trust a ho,
Never trust a ho,
Won't trust a ho,
Won't trust me.
X's on the back of your hands,
Wash them in the bathroom to drink like the bands.
And your setlist (setlist),
You stole off the stage,
Had red and purple lipstick all over the page.
B-b-b-bruises cover your arms,
Shaking in the fingers with the bottle in your palm.
And the best is (best is),
No one knows who you are,
Just another girl alone at the bar.
She wants to touch me (Woah),
She wants to love me (Woah),
She'll never leave me (Woah, woah, oh, oh),
Don't trust a ho,
Never trust a ho,
Won't trust a ho,
Won't trust me.
Shush girl shut your lips,
Do the Hellen Keller and talk with your hips.
I said, Shush girl shut your lips,
Do the Hellen Keller and talk with your hips.
I said, Shush girl shut your lips,
Do the Hellen Keller and talk with your hips.
Woah, woah, woah...
She wants to touch me (Woah),
She wants to love me (Woah),
She'll never leave me (Woah, woah, oh, oh),
Don't trust a ho,
Never trust a ho,
Won't trust a ho,
Won't trust me
ACE...
If ACE were an ascending wedge... what would be the target, and in what time frame would you expect it? Little TA trivia I guess.....
Tuesday, June 9, 2009
ABC's of channels/trendlines...
Winace is bearish..... blah blah blah...... blah blah blah.....
Ok, something different for you, the construction of a bull-trap. I am not saying this is a generalized market scenario at the moment, just characteristic of the chart below. Like ETW has alternate counts, oscillators and indicators have divergences, well... trendlines and channel lines alike have alternates. The red channel in ABC appears to have broken, todays close appears to be a re-test of that broken channel line. This channel was constructed using the open and closes of the bars which deflect from it. The green channel was the fail catch, it was constructed from the intra-day highs of the candles. This is how a bull, or bear, trap presents... always. May the green channel fail? Sure. Does every bull or bear trap actually give targets beyond the apparantly broken line? Yup, sure does. Every turn in the market, on every time frame, can be predicted with channels. This can not be said with indicators, oscillators, and so forth. Where there is a turn, there was a channel, count on it. Ok, enough of that, on to my chart gazing... number crunching... and whatever ;-)
An added note. When a channel does fail, the time frame from the break to the re-test of the broken line has to be proportionate to the width of the channel. For example, a 20.00 wide channel on SPY will not break and re-test in 2-3 days, more like 2-3 weeks. 
Sunday, June 7, 2009
Warning... from Winace
OK, many may not agree with me to be utterly short, not an issue.
The risk of being long this market, now, far exceeds any potential chance of reward. I can not express FAR enough.
Any individuals you know that do not actively play the market, who have 401K, IRA's, or whatever, I would STRONGLY urge those individuals to go to cash.
People, traders, investors, anyone for that matter, do not fathom how close we are, and to the extent it will be, of a major market meltdown.
The things I see in the charts, in market pricing action, make January 2008 to March 2009 pale in comparison of what may ensue shortly.
I do not make these statements because I am heavily short at the moment. As I said, do not short if that does not make you comfortable, but for the sake of capital preservation, DO NOT be long!
Added: Please check the comments section, sometimes I include very important information there that was not in the original post.
Saturday, June 6, 2009
JPM gunning upswings???
I wanted to take the moment to address an article forwarded over to me from a friend of mine. The article is located here: Zerohedge
The article addreses JPM's agressive buying to swing the markets to a higher level. There are a few points worth noting that will make you want to double think watch you are actually seeing. If I were JPM, and was actively distributing stock to over eager buyers, I would want to show strength to further my own cause.
JPM is not going to blatantly leave footprints to show their intentions, rather, they would want to mislead traders, and the trading public (including hedge funds) to their true intentions.
Larger market entities would not bulk trade an individual issue, as you see here in the SPY. They are more likely to distribute volume over many issues located within the S&P to conceal their motives.
Here is what I perceive to be the hidden intention and how it is unfolding.
JPM buys large block lots while simultaneously shorting, or distributing, in higher lots sizes through possibly all individual issues within the S&P. The volume distributed far exceeds the total volume accumulated within SPY. If you were wanting to perceive strength, you will do it in the most commonly and actively traded issues, for they are what is on the radar screen. Broadcast an intention while deceivingly doing the opposite.
They can actually pull this off via distributing other issues, or accumulating puts, but stock distribution is most likely, deepending on their time frame which they intend this market to correct. When large lot sizes are accumulated quickly within SPY this pulls in many other traders and hedge funds to join the momentum. They took the bait, now who do you think is actually positioned to profit?
The blatantly obvious is typically the most incorrect. Don't expect a reverse psycology approach here either, for it is the general public they are deceiving, fancy tricks not required!
Friday, June 5, 2009
The dawn of a new market.
It is pretty common that financial blogs peek traffic in market extremes. This is apparent here also, Monday was a new high in traffic. My current dance with the devil is getting a little extreme. There has not even been a slight pullback to take some capital back out to hold in reserve to add back in at new highs. I can guarantee you we have entered into a new market era. The markets, which most average investors see as a place of death of capital and termoil, are going to get much more severe. This has been projecting since May of last year, and it is still expanding in terms of extension volatility. Once my current trades have run their corse, I will be making some modifications and adding some proven techniques based all on the same variables. Those variables are extensions, defined de-leverage areas, and reset levels. The five trade techniques are:
1. Primary Extension Plays (Scaling Fade Trade)
2. Secondary Extension Plays (Scaling Fade Trade)
3. Rolling Trades (Rolling Delta Trade)
4. Momentum Trades (self explanatory)
5. Arbitraged Pair Trading
Trade type 4 hedges type 1,2,and 3. So, momentum trades will consist of approximately 50% of my trade volume.
Trade type 5 is self hedging.
These techniques are being put into my trade arsenal for one primary purpose, to reduce draw-down. My primary rule remains in place... do not lose money. All trades will have a stop loss in place to one extreme or another. Type 1 will have the most liberal stop, type 2 a little tighter, type 3 will be a low capital allocation/ high return trade that will be expendable, hence no concrete stop, just capped capital utilization amounts. I will give some more details regarding these trades types as I place them. But, first things first, I need to finish the current dance.
I am utilizing these combined techniques because the market has altered. It is no longer the markets we have traded of old. This is good news for some, but bad news for many. The primary market extension percentages prior to May '08 have now been bumped to secondary extensions. A secondary extension is an extension that falls within the primary extension to its entirety. The start, top/bottom, and reset can all take place within a primary extension without the primary ever being reset. Multiple secondary extensions can lie within a primary.
Prior to March of '09 secondary extensions did not exist. Anything that resembled one did not actually adhere to the markets rules regarding compensatory moves. Only the primary extension held to these rules. The secondary extensions present now exactly resemble the primary extensions of old, regarding extension levels, de-leverage points, and resets. The new primary extensions have been carried to a whole new level. They are extensions that can only be handled by the largest of market entities, it would not surprise me whatsoever if these where federally appointed entities with federal backing. The job these entities now have are to regulate a much more dynamic market environment. By enlargening volatility in a controlled manner, they may be able to keep extremely drastic moves more in check to prevent the sudden collapse of the financial systems as we know them. This would prevent the the major indices from having uncontrolled violent moves of 60-70-80-etc percent that go uncompensated. The now secondary players are the still the primary liquidity providers and market regulators, it is just their entry criteria which has been altered. The immediate problem with this is we will see very dynamic bursts within the markets, say up to 10% before even the first line of regulation steps in. This means dramatically increased "whipsaw" events of greater magnitude. Pretty much making the day-traders life a living hell.
The newly introduced "secondary extensions" will have quite the impact on technical analysis in a traditional form. First off, patterns within the charts will become larger and more complex. There will be what appears to be much more "noise" on a shorter time frame. Oscillators and indicators which base their calibration and mean on channel adherence (basically all of them) will become much more inaccurate due to multiple channels running simultaneously on a single given issue. These will be in addition to the multiple channels created by "basket" trading a broad index through grouped issues.
For the momentum trader, this is great stuff. Momentum will be more easily identifiable, more sustained, and include higher magnitude moves. The reversal trader, technical trader, contrarian trader, and any other short term trader is going to be torn to shreds. Mark my words, book mark the page, it will happen.
The vast majority of individuals who attempt navigating the markets will fail miserably, this is just stating the basic facts. You are going head to head with professionals that do not care how you may suffer, they will not lose sleep over it. You have spent all your time studying techniques, oscillators, indicators, Elliot Waves, trend and channel lines, etc, etc, in an attempt to make headway within the market. After 100 years of statistical data to fine tune these tools they just changed the rules. I can sat this... Obama has brought with him a new era within the markets. May the market gods help those who need it. Good night, more on this at a later time. Enjoy your weekend, have a beverage of your choice, and one for me also!
Winace
Thursday, June 4, 2009
While I sit here....
While I am sitting here, with my thumb up my ass waiting for this correction, I figured I'd show a few charts. Now these were random, not picked out of a pile. I just opened a watchlist and charted the first 5-6 I pulled up. This goes to show, I do not see a correction in just a few items, but almost every chart. 
Monday, June 1, 2009
Charts, I will be adding more to this post...
The NDX
The SPX (duplicate from last post
ADBE
AEM - Quick note... typically when you see 5 parallel lines that I draw, these are preset to 0, 25%, 50%, 75%, and 100%. It is not coincidental the points hit where they do. You will also find additional parallels within these lines, at the same slope, if some of the exact hits are off slightly it is because the parallel tool may be of better value if these numbers where preset to fibonacci percentages.
Regarding AEM itself, numbering these three lines top to bottom, 1, 2, and 3, let me point out a few interesting things regarding these lines. First off, most know my reasoning behind channels and why they do broadcast price reflections with some regularity. Channel lines, depending on where they are within the chart and market conditions can be violated in one direction without much consequence. When approached from the opposite direction, the odds will lean for another reaction. Note line 1 in AEM (top line), any move toward the line when approached from above typically accelerated the move through the line. When approached from the bottom it had a better probability of actually deflecting price in the opposite direction. The bottom two lines have a push pull type conflict, created from seperate large dollar trading entities basket trading various indices or portfolios in which AEM may be. This creates a range of resistance. When approached from the top, the top line will give way freely while the bottom line holds, when approached from the bottom, the bottom line will give freely while the top line holds. This is typical and MUCH more common than you might think.
AFL
Few more general notes about putting things all together...
You may have heard in books or other reading materials how it is better to intimately know a few issues and trade them exclusively, that every trading vehicle has its own "personality". This is true for the most part. You may have seen me state that I use the extension levels of the major ETFs as my base value, it gets a reading of 1.0. When comparing any other stock to its relative ETF, it gets a multiple of this number. For instance, if SPY is a 1.0, then GS is a 3.0. Goldman Sachs is 3 times as volatile in one way uncompensated extensions. If SPYs acceptable max extension is now 38%, then GS should be 114%!!! Each issue also has its level of reset, or area of retracement for deleveraging and neutralizing the run. To a technical trader, the rise and subsequent retracement in different variations of extensions create the same level of slope identifiable by channels present within the chart. The higher the extension volatility of a given issue, the greater the pitch of slope presented within a chart. To someone familiar with the issue, all that is required is a calculator and last known level from which an extension had started. Of course, the calculator is used to project purchase size for cost averaging to keep the neutralization (reset) area profitable to the degree they are playing the trade. This calculation is based off maximum capital allocation for the trade and maximum projected extension.
What does this all mean? Professional money is not made by speculating the direction of the larger trending move, but fading those players for the guaranteed counter retracement. Sure, if odds add up, they may through a few coins down on a greedy speculative play, but that is not the side of the bread which is buttered. On that note, going to bed, see ya in the morning!
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