Failure Test
Two things to note on this chart of Corn futures: 1) The clean failure test above the summer's highs, followed by a sharp selloff to the bottom of the range. 2) Price is unable to rally strongly off of the support at the bottom of the range. This
General Comments
[dc]R[/dc]eader Jayram asks, " Can you tell what is the significance of the blue & red bar coloring in your charts on the blog?" Sure, Jayram. I use various color rules on my charts, but I do not use them in any systematic fashion (for the
General Comments
Markets alternate between periods of range expansion (usually during trends) and volatility contraction. Breakouts from periods of volatility contraction tend to be strong, and highly directional. This chart pattern in Corn futures highlights volatility contraction near the highs of a recent, large run-up; this is usually constructive and traders can
General Comments
This is potentially a very bullish pattern on the AUDJPY, targeting a move into the high 87's over the next several weeks. Trades should be entered on strength above the trendline (roughly 82.00 in today's trading) against a stop somewhere in the 77.00-79.00
General Comments
Reader Andre asks two questions in response to my post on the failure test trade: It seems that you do not take in consideration any kind of volume information when analyzing the price behaviour around the support/resistance level, is that correct? (like for example the volume on the second
Failure Test
This video blog is a follow up from this post, and digs into some of the details behind the Failure Test trade in a little more depth.
Failure Test
[dc]I[/dc] want to do a small series of posts looking at some of the most important trading patterns I've used over the years. Rather than go in-depth with multiple examples, I'll keep these posts as a high level, introductory overview and will focus only
General Comments
This is why we have entry triggers. I posted this chart pointing out a bear flag in EL on the day marked with an arrow, suggesting that a good entry would be to enter on a weak close. A few days later, the stock is higher, but disciplined traders should
Anti
I tend to believe it's usually counterproductive to do too much in-depth technical analysis on different market cap or sector indexes. Everything is so tightly correlated anyway, so differences often become a matter of analyzing noise. Looking at retracement ratios and trendlines on these instruments and trying to
General Comments
[dc]O[/dc]ne of the main challenges for stock traders is understanding the ebb and flow of the broad market on the shortest timeframes. There is so much noise in price movement at this level, and so many instruments are traded, that it is hard to know what is
General Comments
The daily chart of Estee Lauder Companies Inc (NYSE: EL) shows a clear bear flag, which sets up a potential trade on any breakdown. Note that this is only a setup, and still requires an entry trigger. In this case, shorts could be initiated under the previous day's
General Comments
[dc]W[/dc]hen trying to master any complex subject, it can be helpful to reduce things, as much as possible, to basic elements. Price movements in markets are very complex; so many competing influences and timeframes, combined with a good dose of randomness, conspire to hide any simple tendency