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DbPhoenix
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Everything posted by DbPhoenix
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First, understand that whatever comments I may make are within the context of Wyckoff and not whatever you may have learned elsewhere. Therefore, saying that there are no pinbars in Wyckoff or that the volume is not climactic is a clarification not a criticism. Given that, you picked up on a nice detail, though I suggest that the lack of follow-through on the 27th in combination with the narrow spreads on both days provides support to whatever suspicions one might have. Much the same could be said about the 19th and 20th. Given the increase in volume, though, buyers are giving it the old college try. Unfortunately, they're shooting blanks. Be very careful with hindsight. It can mess you up in subtle and insidious ways, particularly since it is so pervasive on message boards. See my note on this to Niko. Plus a disinterest on the part of buyers to take advantage of this situation. Nice note re the supply line. Note also the increasingly tight spreads (see again my comment to Niko). Let the market come to you, even if you're aggressive. Consider a buystop above the high on May 1 and see if you get that breakout. If you don't, you're out. In fact, you're not even in to begin with. Since you didn't get your breakout on the 2nd, you'd be justified in considering a short below the low of that day. Once the cascade begins, it can be tough to find a short entry. Better to let the new short-sellers carry you along. This is, of course, hindsight in this particular case, but the strategy and tactics are pretty standard. The trick is (a) seeing the failure and (b) knowing what to do with it. “Looks” is right. Good example of a false climax, though it is climactic. I assume by “sellers” that you mean short-sellers. Given the angle of the trend channel, it does qualify as “oversold”, though that doesn't necessarily mean buy. It may just drift back into the channel and continue its steady decline. Nice job. You've told these stories before. Db
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Note that just before price exits these zones, spreads narrow, i.e., equilibrium is reached. On the whole, the mkt finds equilibrium intolerable, as one can't make money if price doesn't move (we'll ignore selling options in this application). Readers should note that the immediacy of this failure is important. Note also that the failure took place at the midpoint of the March range. Careful. You're flirting with hindsight insight. Not quite a hinge, but a springboard nonetheless. And volume need not be “significant”. In this case, the increase in spread may be more informative. Sellers are pushing, but they don't have to push hard since buyers aren't resisting much. Volume is not all that low. Buyers keep price elevated on several occasions. Sellers are not especially aggressive, but they're there, and buyers are not particularly strong, but strong enough to keep price on a steady downward course, not a plummeting one. Another informative failure. Note the relationship between the open and close. Much better. Take care, though, to avoid hindsight insight. You're not backtesting anything here, and whatever sophistication you may be acquiring with regard to analysis may be colored by the fact that you know what's going to happen. This is next to impossible to avoid, and makes this exercise more CWS than pure practice in analytical skills. For the latter, pick some period from the past at random, in oil if you like, some period where you don't know what's going to happen in the immediate future (if after you start it begins to look familiar, pick another period and start over). Then start at the far right edge and begin this sort of exercise again. This will give you a much more accurate estimate of just how much progress you're making in this type of analysis. Db
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Anyone who wants to work on the exercise suggested two posts above is welcome to give it a shot. Time is money. Db
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RULE #6: To win at poker you must embrace the idea of breaking even.... A distaste for breaking even can lead us into the valley of pressing and overplaying and other wrongful activity. We have to have a positive mindset for the long run. But one-sided expectation for a short performance interval is just going to chew us up. Breaking even or a loss is just one of the natural outcomes in a statistical run. This is the way our trading plan supposed to work given the nature of the game... it is not broken. The reason we have a plan in place is to help us focus on executing sound decisions under fire. Do not make it difficult by outsmarting our own plan. Pressing at the last hour to meet some number in our head is just out of place. When you have a glass of muddy water, you can't make it clear by stirring it. You can't make the mind clear by forcing it one way or the other. Don't force your expectations on your trading; let the Law of Large Numbers do its work in peace. (William)
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You have to decide whether you want to trade or you want to make money. "I think it would be a good idea" doesn't even begin to approach a well-reasoned analysis for taking a trade. Stop. Think. Forget about trying to catch the bottom. The bottom will tell you when it's ready to be caught. But you won't hear it if you're not paying attention. Or if you don't understand its language. Which is why I suggested the exercise in my previous post. Learn the language and you'll understand what the chart is trying to tell you. Db Edit: BTW, you don't have a great deal of time to complete the exercise I've suggested above. You may get your climactic bottom in just a few days, and your being able to recognize it when you see it will enable you to plan how to take advantage of it.
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First, forget about prediction. It's a waste of time, screws up your focus, triggers all sorts of emotional responses at exactly the wrong time, and makes you feel either unnecessarily bad or deceptively proud (and one should avoid self-deception at every turn). Second, there was no reason to go long before the bottom fell out. But if one did so anyway, there is no automatic SAR in Wyckoff. Nor is there anything mechanical, whether SAR or not. If you had had good reasons to take the trade and it turned out to be wrong, you would have had to exit the trade without tears, without banging the desk, without swearing, without throwing yourself on the floor. Oh, I was wrong. Okay. Now what? Let's see. At which point you re-examine what's in front of you without getting into what you did that you shouldn't have done or vice-versa. That comes later. Just look at what's in front of you. New trade. New data. What is the most appropriate course of action? Go long again? Go short? Do nothing until the picture becomes clearer? Granted, this all has to be done in minutes if you're daytrading, but you can't do it at all if you're getting all emotional about getting it wrong. And going mechanical isn't going to make it any easier, other than inserting an imaginary accounability buffer (it wasn't me; it was my system). The "methodology", then, would have you stop, forget about everything that just happened, examine what is happening now, then decide upon an appropriate course of action without any sort of drama. Third, as to whether or not a short below 90 on a breakout of that range would have been a good idea, we enter the land of hindsight trading, in which traders, beginning and otherwise, wander aimlessly, sometimes for years, usually on message boards/trading forums, but often in the clutches of some guru who couldn't trade in real time if his life depended on it. Unless you are learning the ins and outs of some new technique, it is a terrible place to be and can screw you up for far longer than you'd believe possible. Don't go there. However, trading ranges are everywhere, as are potential breakout scenarios. Analyzing what makes some work and others not is perfectly legitimate, something very different from the "here's a trade I took this morning" nonsense. So, let's analyze this, and you tell me whether or not this would have made a good short and why. Look at the behavior of price (i.e., buyers and sellers) and how it relates to volume each step of the way. Where are the clues that tell you that this might be a good short trade, or at least a not-so-good long one? Start with April 23rd. And make sure you read the chart left to right. If you have to cover prices with a sheet of paper and reveal only one day at a time to yourself, do so. This will help you to avoid nonsense. Db
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RULE#5: Sometimes others get to play and you don't.... But the most important thing is this: you must be comfortable with this - welcome it. Make peace with this idea. Cross your arms and sit back. It is silly to try to catch every swing or worry about missing a move. There are thousands of markets out there and we are missing a play ALL THE TIME. The objective is to execute the business plan with precision over a long run. Precision = Speed. Marginal, wild, random trading will only bring chaos into the statistical equation. There are also internal reasons not to play. The poker adage H.A.L.T (Hungry, Angry, Lonely, Tired) basically says that if you can't play with a smile, don't play at all. And scared money rarely wins. (William)
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There is one other aspect of this chart that I find interesting, and I may as well put it all here. Notice that price sails right through the midpoint of the more recent trading range (blue). When it reaches the bottom of that range, it comes to a screeching halt and kicks the dirt for five days before resuming its decline. It then drops all the way to the top of the next range (the red one), where it sits for four days before again resuming its decline (if you had chosen these as support levels, this behavior tells you whether you were right or wrong in doing so). These rest stops in and of themselves are clues that something is changing. The fact that they relate to tentative support levels increases the importance of the clues. And note that the angle of decline changes dramatically after the first pause, as price works its way down to the next support level, the top of the red trading range. And these changes, anything out of the ordinary, are what should attract your attention and keep you on the alert. Db
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Your levels are fine, as far as they go. But it is not difficult through either color or line width to separate those which are more important from those which are less so for a quick visual review. As for those which are more important, yes, the tops and bottoms and middles of trading ranges are the best starting point, but the behavior of price trumps everything. It is how price behaves as it approaches a given level that will tell you whether you should be on alert or not, and so far price continues to be in freefall (which may change by the end of the day). Support is not support until it acts like it. It did so briefly over the past few days at the top of your range at 90, but support didn't hold. And volume wasn't indicative anyway. Regardless, if one had placed a buystop above that congestion, it would never have been filled. A sellstop (a short) below would have been. And, yes, this is hindsight, but it's standard strategy and tactics in this application. For more, see the Volume thread. I have 15 posts there, but there is much of value from other contributors as well. See also And Then There Were Three and Trend. Db
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Not bad. If by "spring" you mean shakeout (there are no "springs" in Wyckoff), that's unlikely. This stock has been pretty much dead in the water for three years. Ordinarily I'd suggest waiting for a breakout above this trading range, but with the dividend, you can be paid for waiting. Consider then buying at support with a relatively tight stop. You may grow old and withered before anything happens, but at least your money will be working for you. You might also want to look at MRK. Db
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Just the opposite. You're in a downtrend, so your first course is to look for short entries. Forget about long entries until you see some climactic action at or near an anticipated support level. Otherwise, you're just giving your money away. As for support, your support is at 77, though traders may reverse the price before that since this is after all a speculative commodity. Therefore, be on the lookout for climactic action from this point forward, but don't pass up whatever short opportunities present themselves. Db
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How much is the dividend? Db
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I don't recall mentioning upthrusts, at least not since I resurfaced. In fact, I try to avoid using "upthrust" and "downthrust" so as to avoid confusion with the thrusts and shakeouts found in accumulative and distributive bases. In any case, since it took two months to fail, I don't know that I'd characterize it as an upthrust, except in the most general terms, i.e., to characterize the move somehow. As for "accumulation", take care. The terms "accumulation" and "distribution" have become buzzwords over the past few (or more) years, and this isn't a battle that I want to fight. But, technically, there can't be accumulation or distribution in anything that doesn't have a finite number of trading instruments, such as shares. In other words, you can't accumulate something that has an infinite supply, unless you're using "accumulation" as a synonym for "buying" or "collecting" and ignoring the dynamics of accumulation and distribution themselves. That said, you might be able to detect accumulation or distribution in the SPX if you treat it as a proxy for those stocks which are largely responsible for moving the index. Look at those 5 or 8 or 10 stocks and see what's happening with them. If there's evidence of accumulation or distribution in those shares, then there ya go. If not, then the leveling out of the SPX is likely not of any particular importance. As for a change in the trend, that depends on your starting point. If '11, that's pretty much done. If '09, not so much. Db Edit: I know I've posted this somewhere, but I forget where, so here it is again: Incidentally, if you plot a regression channel, the bottom of it may "provide support" given the coincidental swing highs and trading range midpoints:
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Too late for now, but think about this for next time. Db
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Posts from 4/28/12 to 5/30/12 have been moved to the Nature of Support and Resistance thread for reasons explained here. Sorry for any confusion. Db
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I moved your post here because I took a wrong turn way back there and most of these exchanges among you and gaelgss and me have had more to do with S/R itself than setting up trades, which is what the Trading in Foresight thread is all about. Or supposed to be. Rather than my pushing too hard, I've elected to back up and take the other fork, i.e., exploring S/R itself. Only when that's understood will one be ready to determine the strategies and tactics necessary to take advantage of it. And that means pursuing the discussion in this thread, which requires no plans and no deadlines. Now looking at the daily CL chart, in what direction do you expect this morning's move to be most likely? Db
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Via Addicted2Success and Barry Ritholz: Insightful Investment Quotes Warren Buffett (Net Worth $39 Billion) – “‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” George Soros (Net Worth $22 Billion) - ”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.” David Rubenstein (Net Worth $2.8 Billion) – “Persist – don’t take no for an answer. If you’re happy to sit at your desk and not take any risk, you’ll be sitting at your desk for the next 20 years.” Ray Dalio (Net Worth $6.5 Billion) – “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.” Eddie Lampert (Net Worth $3 Billion) – “This idea of anticipation is key to investing and to business generally. You can’t wait for an opportunity to become obvious. You have to think, “Here’s what other people and companies have done under certain circumstances. Now, under these new circumstances, how is this management likely to behave?” T. Boone Pickens (Net Worth $1.4 Billion) - “The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” Charlie Munger (Net Worth $1 Billion) – “If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.” David Tepper (Net Worth $5 Billion) – “This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.” Benjamin Graham – “The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.” Louis Bacon (Net Worth $1.4 Billion) – “As a speculator you must embrace disorder and chaos.” Paul Tudor Jones (Net Worth $3.2 Billion) - “Were you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt. After a while size means nothing. It gets back to whether you’re making 100% rate of return on $10,000 or $100 million dollars. It doesn’t make any difference.” Bruce Kovner (Net Worth $4.3 Billion) - ” My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks. The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.” Rene Rivkin (Net Worth $346 Million) - “When buying shares, ask yourself, would you buy the whole company?” Peter Lynch (Net Worth $352 Million) – “I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” John Templeton (Net Worth $20 Billion)- “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.” John (Jack) Bogle (Net Worth $4 Billion) - “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
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If you're interested in others' comments, I suggest you post this evening. Not everyone trades in the same timezone, and even those who do may not have the time to look at your post pre-mkt, much less study an analysis. Db
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RULE #4: Don't feel like a martyr when folding. Don't start feeling self-righteous about all this folding you are doing ... as if now it owes you (because you've been so good, so disciplined, so patient ...). This is a trap .... As you keep folding, you must feel neutral about it.
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Rarely do any of us grow up learning how to operate in an arena that allows for complete freedom of creative expression, with no external structure to restrict it in any way. In the trading environment, you will have to make up your own rules and then have the discipline to abide by them. The problem is, price movement is fluid, always in motion, quite unlike the highly structured events that most of us are accustomed to. In the market environment, the decisions that confront you are as endless as the price movements you intend to take advantage of. You don't just have to decide to participate, you also have to decide when to enter, how long to stay in, and under what conditions to get out. There is no beginning, middle, or end - only what you create in your own mind. JL
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It's all the same: price/volume, supply/demand, support/resistance, trend/trading-range. You might be interested in this once-upon-a-time discussion of oil (to avoid confusion, the discussion was a hindsight analysis exercise, hence the different thread; this thread is focused on foresight analysis, i.e., trade preparation). Db
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"Reasoned comments". I like that . And those traders who want the simplest possible trend plot can just draw a regression line/channel. They always help the trader stay out of the weeds.
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Hey, Tannis, how ya been? Funny that you should post this chart with the annotations you've added because I've been chewing on that "trend channel" we may or may not be in. If one reads the chart from left to right, which of course he should, the supply line is first drawn from 1422 to 1390. When price makes a new swing point at 1393, it can be rotated up to there. And, technically, it can subsequently be rotated up to 1415, as you have done, when that swing point is completed. And as a supply line, that's perfectly okay. But as a trendline, I'm not so sure. If you copy it and paste it as a parallel line below, as a tentative lower trendline, you end up with a hell of a lot of empty space, and I tend to be suspicious of trend channels that contain a lot of empty space. As an alternative, consider leaving the supply line at 1422/1393 and view the burst up to 1415 as an "overbought" condition. If you copy that line and paste it underneath 1357, you have a tentative trend channel which slides just under 1292. Not suggesting it provides support; that's more likely provided by that long box from Feb to Aug '11. But it does provide a better idea of where demand and supply are floating as they wend their way down. And this channel has far more price activity than one drawn under the third-to-the-last swing low before the peak. All of which may be pure fancy, but it's worth considering, even if the consideration is set aside to be picked up later, if necessary. Db
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It is not my intention to provide a running commentary on the market or to make "calls". If I were to do that, eventually people would start asking about my newsletter (I don't have one) or my dvd (I don't have one) or my next webinar (this is it). But the point of this thread [Edit: this arc was originally in the Trading in Foresight thread] is to encourage the trader, budding or otherwise, to think -- and hopefully plan -- ahead, rather than continue to peer fixedly into the rearview mirror. Two weeks ago, I posted this chart: Then a few days ago, I posted this one: Given that the NDX and NQ numbers are not identical, they're close enough for S/R work. In any case, it is clear that price did not rally off what had been support, so there was no long trade. Was there a short trade? That's up to the individual trader, but not for me. Since we had entered an old trading range, odds were that we'd waffle around in this area until traders started looking for a different value. Which is what they did. Took a week to exit this range, and it turned out to be to the downside. This part, of course, is hindsight. I didn't know we were going to wander around this old trading range. We could just as easily have plunged. I would like to point out, however, that once we did exit that range, we returned to our course, and the "foresight" chart I posted was back in play: See where price found R yesterday? Exactly. Hindsight? No. This was posted over two weeks ago. So stay ahead of it. Plot these zones and levels. And be patient. In order to act effectively, you have to know when and where to do it. Otherwise you end up acting impulsively and emotionally. Db
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Don't be discouraged if no one responds. That's the nature of these forums; few people want to go out on a limb (which is why you see so much hindsight analysis). Doing these analyses is like exercising a muscle: do enough of it and when the time comes to make a decision in real time, you'll be ready to do so. And writing it out is always beneficial, particularly when it comes to clarifying your thoughts and the thought process. Db
