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DbPhoenix
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Everything posted by DbPhoenix
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A catch phrase that's often tossed around message boards urges the trader to trade what he sees, not what he thinks. It neglects to point out, however, that what the trader sees will depend on what he chooses to look at. And the clues one gets often depend on what it is that he's looking at. Here, for example, the break of the demand line looks pretty serious and might prompt the trader to think that we're in trouble. Using a daily chart, however, the break looks like nothing more than a trivial oversold poke. As to midpoints and channels and ranges, I've mentioned that there are a lot of overlaps up here, and finding S/R intraday becomes that much trickier. The trader who locates as many of them as he can (e.g., 54 and 59) will be better prepared to act if and when these levels become important and will be less likely to be caught off-guard. Overnite and premkt activity can be very helpful, particularly the last hour before the open. Even if one doesn't trade the open, careful study of what traders are doing there can prevent him from pushing at the wrong side when he's ready to enter a trade.
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Generally speaking, if they yield a profit, they're valid. As to whether or not they're a good idea, that's a different question. If you don't enter where you're supposed to, then anything else is going to be second best. Or worse. So when you see what you think is a trading opportunity, like 1, ask yourself where you should have entered. You should have entered at 54+/-. Can you get as good an opportunity by waiting for ten points and entering at what may be the end of the run, particularly since your entry would be at or near what had been and might still be support? Probably not. I suggest, then, acknowledging that you should have entered earlier, didn't, and wait for as good an opportunity or better. As for 2, my answer is much the same. If you were long, was there enough of a divergence at that level to persuade you to exit that long and enter a short, or would you prefer to use a tight follow-stop behind your long and let the market tell you whether to stay in or get out? Given the stride and the fact that sellers were barely visible, much less aggressive, was there anything in the action itself -- aside from the price level -- that said "short"? Did the 3+ minutes of stalling at 54 say "test", or did they say "springboard"? If the answer to any of this is "I don't know", then stand aside, focus on the price movement, the activity, the volume, and apply whatever you learn to the next opportunity. Edit: I should also point out that, during earnings season, price will launch itself from unanticipated places and culminate in unanticipated places, so whatever you learn from trading during these periods will not necessarily apply to the ordinary day to day. If price seems unusually skittish, you may want to satisfy yourself with scalping or just wait until it's all over and begin again after earnings are more or less in.
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The technical rally has nothing to do with swing highs. It may not be anywhere near one. The "technical rally" is so called because it is made up of at least some -- and probably a great deal -- of short-covering. It is not "good buying", i.e., purchases that are likely to be held. Because of this, and because at least some of the buying is done by ignoramuses, the rally won't hold, which is the reason for the test. If selling is done, the downtrend will not continue. If it isn't done, then it will. Therefore, the most aggressive and most profitable entry is the trough of the climax low. The next most aggressive and next most profitable is the trough of the test. The least aggressive and least profitable of the three entries is the move beyond the swing high between the climax low and the test low.
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I take it you didn't use it to go for the short at 53 (it also provided a signal to exit the long). Either way, glad you had a good day.
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Was the TQ of any help, or have you not been able to get that working yet?
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I posted the first two-thirds of this chart somewhere, but I don't remember where. Given the importance of context, however, I've tacked on the last third and included an overview of the longer-term (see inset). This may help put the preceding posts in context. Or not. Either way, it's here for whoever wants to play with it.
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Gringo and wj pegged two quick trades almost to the tick this morning, the long off the test of support at 44 and the short off resistance at 55. Price then dropped to the support level of the previous range established on the 14th and 15th. If the downmove continues, next stop will likely be 30. My thanks to them for their participation.
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You may be in the "building the car" stage, but it is not necessarily the Wyckoff model. The apparent emphasis on bar by bar analysis in some of the material will mislead those who go no deeper and motivate them to study bars, looking for volume bars of given heights and price bars of given widths and mixing all of that with the positions of closes in order to find guidance for subsequent trades, even to the extent of developing mechanical systems, even software. Wyckoff's approach, however, is based on (a) continuous price movement that (b) moves in waves that are determined by © imbalances in supply and demand, or buying pressure and selling pressure. The statements that he makes with regard to bars are not the result of studying bars but of twenty years of following the tape. The charts, or "graphs", he used were merely summaries of everything he learned through watching the tape. Anyone who attempts to develop an understanding of the continuity of price movement and its wave structure without actually looking at it is going to be at a disadvantage when compared to the individual who watches price move tick by tick and who watches volume ebb and flow along with those price movements. Building the Wyckoff car, then, is not a matter of assembling volume bars of varying heights with price bars of varying widths and welding them with closes in varying positions. One might come up with something that holds together, but it wouldn't go anywhere (this helps to account for the thousands of posts which can be made with regard to this sort of variant with the net result that participants still don't understand it and still can't make it "work"). Building this particular car requires a familiarity with and an understanding of the continuous movement of price. Unless and until the individual develops this understanding, the Wyckoff approach will likely be very frustrating.
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Yesterday was one of those not so easy to define days in which one has to allow price to create a range in the moment along with new S/R levels. Here it was first a test of 61, then 53, then 61 again, then 53 again, all hovering around a midpoint determined by previous swing highs. Not a great range, but the moves were reasonably clean until price found equilibrium at the midpoint. These are not the easiest days to trade since one has so little to go by. But they do reinforce the idea that one must be in front of the screen, watching price and volume move together, in order to develop a sense of just what it is that traders are trying to do. Without that substance, one is reduced to trading form, and that leads to many of the difficulties people have when they try to apply these principles.
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I can speak only to Wyckoff since so many of those who claim to apply "Wyckoff principles" to their work don't do anything of the kind. But Wyckoff did not "analyze each and every bar to find meaning". The bar was simply a means by which he told a story. What you get out of all this depends on what you want from it. Think of it in terms of learning how to operate a car. You can buy, rent, or borrow a car from somebody and arrange for that somebody to show you how to make the car go, how to make it stop, how to make it go left and right. At some point, you may become more interested in the why and watch somebody rebuild an engine or transmission or even assemble an entire car. If you become even more interested, you may end up building a car yourself. Or, if the mechanical is not appealing, look at the process in terms of fine art. You can go to a gallery and buy something. Or if you want to know more of the process, you can watch somebody create the work. Eventually, you may study and learn how to create one yourself. Applying these analogies to understanding price action should not be a great leap. Think about it.
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I have several views: range, tick, time, CVB. But I only draw channels and trendlines on time charts because that's what Wyckoff did and because I attach the same importance to them. There will be differences if these lines are drawn on charts other than time charts, just as there will be differences in trendlines according to whether or not one includes the overnite. And the differences can be minor or major. But I'm not going to tell somebody they can't use a range chart if they want to be "pure". Whatever works for them. I do however try to make a point of modifying their charts rather than start over with one of my own using a different basis for the bar (or tick, or line). If I were to do the latter, we'd be talking apples and oranges. I mentioned in my last post on this that Wyckoff would consider a move out of the channel to be an "overbought" position, in which case price would retreat, which it did. Whatever chart type one uses should have shown that overbought condition. If it didn't, then the trader missed out on important information. One can't understand what price is trying to tell him if he's speaking a different language.
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The upper limit of whatever you're looking at is resistance. The lower limit is support. As for the box, or range, you can trade that if you like and ignore the channel, but, if you do, what's the point in drawing the channel? And shorting resistance without any confirmation of weakness -- such as rejection of the upper limit -- just isn't wise. How is the volume any more climactic than at any other swing point, such as the beginning of September? In any case, the high volume occurs on the downside, not the upside. And, in any case, if you were going to short what you saw as a test of resistance on weak volume, you would have shorted yesterday. That buyers were able not only to halt the downward progress of price on Friday but push it back to resistance yesterday suggests strength, not weakness. Again, volume reflects the degree of participation. If you want to know whether buyers or sellers have the upper hand, look at price action.
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Bummer. It's worth noting, though, given the pre-planning that was posted, that price found R at 40, to the tick, then S within two ticks of 30. So the strategy remains sound. As for the move "after hours", this is what we'd call "overbought". One has to be careful about bias, and you may recall that I've expected a test of this level, but the channel may be beaten by this longer-term R. If it isn't, then we can look forward to further upside within the channel.
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And why would you do that? Your tactics are yours, but placing a short under the day's low or a long above the day's high will avoid a lot of bad trades. If you're going to try to pre-empt the price action, you may as well trade intraday off hourly bars. Which a lot of people wind up doing. And then they're back where they started. Why are you calling it resistance? It appears to be no more than a swing high. The last swing high didn't provide resistance, nor did the one before that, tho it did slow price down a little. Even if you weren't trading the channel, you are still in an undeniable uptrend. Until that uptrend is changed, I see no reason to short. Price was not at s/r; price was at r, i.e, resistance. Price left the support station on the 2nd. As to the volume being lower, I still don't understand why that's important to you, much less why it would prompt a short. Low volume means nothing more than low participation. That in and of itself is no criterion for entering a trade. If anything, it's a criterion for doing nothing. The relative strength of buyers and sellers is determined by price action, not the level of volume. Since you are only partly through the swing from one side of the channel to the other, there's no reason to assume that price is going to halt at the last swing high and reverse the trend. As to the test, there was no buying climax, so nothing to test. All you're "testing" is whatever resistance is provided by the last swing high (or any swing high) which, as it turned out, wasn't much. Don't try to outguess the market. Just follow the yellow brick road.
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I'm puzzled by some of your remarks. If your short was EOD, how would it even have been triggered unless you just jumped in at the MOC price? And if you did that, why did you do that? Also, what do you mean by "low volume test of s/r"? Do you mean a low volume test of support and a low volume test or resistance? Whether either or both, why would the volume level prompt you to enter a trade?
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A couple of reminders:
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I don't mean to pick on you. You just happen to be handy . And I would have posted this earlier, but I had to leave at noon. Your channel isn't really a channel. Or, rather, it's a channel, but the wrong one. And drawing these correctly, or at least according to Wyckoff, is important if for no other reason than to avoid adopting a bearish or bullish stance where none is justified. In an uptrend, one begins with the demand line, and the first demand line here is clearly too acute, and price leaves it very quickly. A second one is then drawn along the price line that eventually makes it to 1710. When this one is broken and a new high is made, a third one is drawn along the price line that eventually reaches 1730. This one is also broken and price makes a swing low at 1707. At this point, one can draw a line beginning back at 1658 or so and connect with this swing low. Drawing a parallel supply line creates a line that is clearly way off base. On the other hand, drawing the supply line first (even though you're not supposed to), along the tops of the swing highs, provides a much better fit, and it provides a clue as to where the demand line ought to be drawn, i.e., the long-dashed line. Thus you do have a channel, but it's not where you thought it was, and the poke below the demand line was not at all serious but just a tiny test of support at 30. Take care, then, not to overlay a channel and shoehorn the price action into that channel. Look instead at the swing highs and lows and see where demand and supply are turning price back. This will enable you to avoid being misled by channels that are pretending to be channels but aren't really.
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Since price moved away from 1712, we've been in a situation where extremes become midpoints (i.e., 30 and 40). Midpoints tend to be choppy and extremes tend to prompt reversals. If a given level is both, this can create problems for the trader. My advice, then, is that if what you perceive to be a setup isn't obvious, leave it alone and wait for an opportunity that is. Edit: Here's an update on the chart I posted a week ago.
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As specific as it has to be in order for you to know exactly what you're going to do and when you're going to do it. For example, it has as of now retraced its way back to resistance. When and where and how are you going to go long?
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Since you're trading off daily charts, the daily chart is all that should matter to you. As for defining reversals, this has been addressed at length in other threads. All the self-talk is fine, but the results of it are what matters in terms of taking action, i.e., the following: 1. If price continue up, I will wait for a pullback to previous resistance and then enter a long. 2. I will enter into a short if prices break below today’s low with a stop above today’s high. 3. If prices continue up, I will enter into a long if a pullback occurs on what looks like lower volume and lower range. If a pullback doesn’t occur I will most likely miss any move higher which is a downside to this plan. This is a plan, though the more specific you can make it, the better. It is specific enough at this point, however, for those who wish to comment to do so. Given that you're trading daily charts, there is also the matter of the chart you posted last February. Since the selling climax and test had already occurred by the time you posted the chart, I assume you didn't buy the test. And since you are not now in this instrument, I assume you didn't buy any of the other entrance opportunities. If you think about why, perhaps you will learn something about your real-time mindset and your risk tolerance that will help you in this current trade.
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To Pinetree: Given that this ought to be about Will rather than CouldaWouldaShoulda, what now? If the ETF posted mirrors the activity in the OMX, it's struggling at resistance, appearing to want to break out. What will you do if it does? What will you do if it doesn't?
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The setup is not so much an issue as a misunderstanding of the nature of trend and consolidation. If price is in a trading range, "bearish" and "bullish" are inappropriate. One sells resistance and buys support. Pinetree didn't buy support at "D" because he was "bearish", but sentiment was irrelevant. If he had bought then, he would now be in a position to take advantage of whatever breakout occurs. If there is instead a reversal, then he can get out of his long and enter a short. That's how trading ranges are played.
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Correct. Correct. That's the basis of Wyckoff's approach. I can't think of anything useful to add to what I said above about the current range. Either buy support and sell resistance until price exits the range or wait for the breakout and buy that or the retracement, if there is one. Anything more is over-analysis. The original Wyckoff material is contained in the stickies and in the threads marked with a green circle and black arrow. If anything you've read conflicts with that, I suggest you set aside what is inconsistent with Wyckoff's own work. To get started, click here.
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Fortunately, there's little need to do any interpreting since nearly all the volume here is irrelevant to the price action. But rather than go over your detailed -- and impressive -- analysis point by point, let's get away from the bar by bar and look at trend and consolidation. If as you say some sort of base had formed to the left of this display, buyers clearly were ready to move price out of it since they were able to do so despite the large amount of selling which accompanied the breakout. They were also able to support price after sellers pulled it back down and hold it at a higher low. From that point, all you have to do is follow the trend until the beginnning of May. You can ignore the volume entirely. At the beginning of May, price breaks what has been up to now a trend line. A few days later, as price approaches the level of the last swing low, there's a spike in volume, i.e., a noticeable increase in trading activity. Sellers want to push price down further, but buyers are willing to step up in force and support price at this level, pushing it back toward the May high and keeping it there as it bounces along until July, forming a hinge (volume during this period is also worth noting as there is a general decline in it, a characteristic of the hinge). Price then exits the hinge on relatively low volume, suggesting that buyers are having little trouble propelling price upward (if there was a lot of supply to deal with, volume would be higher). And now, suddenly, volume becomes an issue since sellers are entering the market to halt or impede its advance, i.e., volume increases, and price stops at "A". But buyers can't or don't want to push price further, and sellers back off, and price drops back to "B", at which point buyers come in to support it. This back and forth continues up to "C" and down to "D". Given that volume increases as and when price reaches support but declines when it reaches resistance, buyers appear to be willing and able to support price at "B" and "D", but don't have enough strength to push price further ahead (or they have it but don't want to use it yet, particularly if they are absorbing the supply that's being offered so that an eventual move upward can occur with less resistance to it). Up to now, buyers are putting their ducks in a row. Their efforts have been focused on supporting price at the bottom of the range. If there's a dramatic change in the level of their strength and sellers put their backs into driving price below support, these buyers may just throw everything they've just bought back onto the market and accelerate the decline. That's the way it goes sometimes. But the only way to avoid trading a breakout from one side or the other is to keep selling resistance and buying support until the move is made. As for the "Composite Man", the public is part of the Composite Man. He/it is not something separate. The CM is comprised of every market participant. So there's no need to worry about ulterior motives, even if determining what they are were possible. All you have to do is follow the price action.
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Only if one considers moves from one end of a range to the other and back again to be trends. For now, we're returning to resistance, so a long is not appropriate unless and until we get through that.
