General Comments
[dc]I[/dc] want to share a few thoughts today on technical trading in general. The points in bold come from the end of the first part of my recent book, The Art & Science of Technical Analysis . I expanded each of those with a little more commentary. These points
Breakout
Long-time market leader consistently outperforming broad market, sector and peers. Check. Positive earnings surprise. Check. Several days of tight consolidation at highs. Check. This is an excellent technical setup to enter a long position on a breakout of the small consolidation. Of course, no technical setup works all the time,
General Comments
This is a chart of NYSE Total Volume with 1 week (red) and 1 month (blue) moving averages applied. There is a seasonal pattern to volume, volatility and trading activity, which all tend to decline into summertime, but recent levels are historically low. Note that the previous times the 1
General Comments
I want to share a quick thought with you today--a little trick in thinking that made a big difference in my trading a few years ago. One of the problems with traders is that we can be stubborn. This happens to everyone, and no one is ever immune to it.
General Comments
One of the reasons we watch and study market leaders is that they can sometimes provide clues to market direction. Yes, they often get harder than the broad market at turns (which is why you must trade them—you cannot "buy and hold" them), but leaders which are
General Comments
When markets are in consolidation (i.e., moving sideways) it is very difficult to find strong edges. Markets tend to be more random, and no consistent profits are possible in a random environment. We believe, based on higher timeframe patterns not visible on this chart (but see this post) that
General Comments
This daily chart of ABX shows a stock that may have found a bottom: after several potential bottoming formations, the rally has carried the stock the upper Keltner channel, suggesting that a pullback could be buyable for a long trade and an attempt at catching a trend reversal. However, there
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The most important levels in markets are those that are clearly visible to all market participants. The July pivot high in Soybeans is a good example of an important level to watch. A failure test (think 2B short entry) at this level would present a serious challenge to the integrity
General Comments
[dc]O[/dc]ne of the challenges developing traders face is learning to manage positions effectively. Think about it for a minute—how many books do you know that show patterns and setups for trade entry? Now, how many do you know that focus on position management? We probably put
General Comments
The bear flag is a pattern that plays out in all markets, though it tends to resolve less clearly (i.e., with more fakeouts and false breakouts) in currencies. Why? I'm not sure, but it could be that the underlying dynamics of buying and selling pressure, while still
Breakout
Volatility contraction is an important element of market action. Essentially, when a market has been quiet for a period of time, there is a higher chance of breakout trades working, or of any sharp move seeing continuation (for several bars.) Though there are many ways to quantify this volatility contraction,
Breakout
Reader Greg asks this question: [dc]R[/dc]egarding your Chart of the day: Bullish Pattern in Aud/Jpy, which as you predicted broke out to the upside. My question is simple...why did you draw it like a flag and not like a range... and how did you spot