Posts Tagged ‘technical analysis’

5 Ways the Wave Principle Can Improve Your Trading

By Elliott Wave International

5 Ways the Wave Principle Can Improve Your Trading 

Jeffrey Kennedy brings more than 15 years of experience to his position as Elliott Wave International’s Senior Analyst and trading instructor. He knows firsthand how hard it can be to get simple explanations of a trading method that works — so he shares his knowledge with his subscribers each month in the Trader’s Classroom lessons.

Here’s an excerpt from The Best of Trader’s Classroom, a free 45-page eBook that gives you the 14 most critical lessons every trader should know. Download the full eBook free here.

Every trader, every analyst and every technician has favorite techniques to use when trading. But where traditional technical studies fall short, the Wave Principle kicks in to show high-probability price targets. Just as important, it can distinguish high-probability trade setups from the ones that traders should ignore.

Where Technical Studies Fall Short
There are three categories of technical studies: trend-following indicators, oscillators and sentiment indicators. Trend-following indicators include moving averages, Moving Average Convergence-Divergence (MACD) and Directional Movement Index (ADX). A few of the more popular oscillators many traders use today are Stochastics, Rate-of-Change and the Commodity Channel Index (CCI). Sentiment indicators include Put-Call ratios and Commitment of Traders report data.

Technical studies like these do a good job of illuminating the way for traders, yet they each fall short for one major reason: they limit the scope of a trader’s understanding of current price action and how it relates to the overall picture of a market. For example, let’s say the MACD reading in XYZ stock is positive, indicating the trend is up. That’s useful information, but wouldn’t it be more useful if it could also help to answer these questions: Is this a new trend or an old trend? If the trend is up, how far will it go? Most technical studies simply don’t reveal pertinent information such as the maturity of a trend and a definable price target — but the Wave Principle does.

How Does the Wave Principle Improve Trading?
Here are five ways the Wave Principle improves trading:

1. Identifies Trend
The Wave Principle identifies the direction of the dominant trend. A five-wave advance identifies the overall trend as up. Conversely, a five-wave decline determines that the larger trend is down. Why is this information important? Because it is easier to trade in the direction


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How a Simple Line Can Improve Your Trading Success

Elliott Wave International’s Jeffrey Kennedy explains How a Simple Line Can Improve Your Trading Success. 

The following trading lesson has been adapted from Jeffrey Kennedy’s eBook, Trading the Line – 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. Now through February 7, you can download the 14-page eBook free. Learn more here.

"How to draw a trendline" is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.

Yet you’d be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, Elliott Wave International’s Chief Commodity Analyst, puts it:

“A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic.”

In other words, a trendline can help you identify the market’s trend. Consider this example in the price chart of Google.


 
That one trendline — drawn between the lows in 2004 and the lows in 2005 — provided support for a number of retracements over the next two years.

That’s pretty basic. But there are many more ways to draw trendlines. When a market is in a correction, you can draw a trendline and then draw a parallel line: in turn, these two parallel lines can create a channel that often "contains" the corrective price action. When price breaks out of this channel, there’s a good chance the correction is over and the main trend has resumed. Here’s an example in a chart of Soybeans. Notice how the upper trendline provided support for the subsequent move.

For more free trading lessons on trendlines, download Jeffrey Kennedy’s free 14-page eBook, Trading the Line – 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. Download your free eBook.

 

This article was syndicated by Elliott Wave International and was originally published under the headline How a
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Gold Mania

Gold Mania

Courtesy of Allan

This gold mania reminds me of the tech mania of the late 1990′s that culminated in the great tech bubble top of 2000.  As you may recall, that ended very badly.  This time around, there are our trend models, so let’s have a look at GLD:

GLD Hourly Trend Model
 
GLD Daily Trend Model
 
It’s the Daily Model that is the key here.  Sitting right on the trend line, either it finds support or knives through for a SELL Signal. The hourly model above is suggesting the latter.
 
GLL is the double short ETF for gold and as shown on the chart below, has just reversed LONG:
 
GLL Daily Trend Model
 
 
Bottom line, there are reasons to be cautious on gold right now, but unless and until the Daily GLD Model reverses SHORT, the intermediate uptrend is still intact. 
 
Past performance is not a guarantee of future results.

Allan’s “Trend Following Trading Model,” is based on his trend-following trading system for buying and selling stocks and ETFs. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here.  For more details, read this introductory article.


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Long Downside Wick…Dollar testing support

Long Downside Wick…Dollar testing support

By Chris Kimble

Downside wicks usually take place at market lows or at support.  The chart below, highlighting several downside wicks and a bullish falling “PATTERN” was the reasons to go long the 5oo index on 9/1  (see post here).

Click on Chart to Enlarge

The S&P 500 had its best September in 70-years bouncing off this support, after it created these “downside wicks.”

The U.S. Dollar is testing key rising support and created a fairly long “DOWNSIDE WICK” yesterday, in the chart below.

dollar chart

Click on Chart to Enlarge

With the Dollar on support, only 3% Dollar bulls and now with this long “downside wick” taking place, all the more respect for this pattern is at hand and understand that a rally in the Dollar, could be ugly (see post here) for many asset classes!!!

KEEP STOPS TIGHT TO PROTECT GAINS…


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Video: The Versatility of the Wave Principle

Video: The Versatility of the Wave Principle
Timeless Trading Lesson

In the video below, EWI senior analyst and trading instructor Jeffrey Kennedy shows how the Wave Principle can help you identify a high-probability trade set up regardless of the direction of the larger trend.

This timeless educational video was taken from Jeffrey’s renowned Trader’s Classroom series and is being re-released because of its valuable lesson. If a few minutes isn’t enough, get more FREE practical trading lessons from Jeffrey Kennedy in his latest eBook.


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Bullish….Bearish… or Neither

Bullish….Bearish… or Neither

Courtesy of Chris Kimble 

Am I Bullish, Bearish or Neither?

Choice “C”…Niether!

I am of the opinion, being Bullish or Bearish are emotional states of mind.  They are NOT STRATEGIES.  I believe that we should invest in each asset on its own individual merits/patterns, not based upon some global macro prediction.

Did I suggest to buy the 500 index (see post) and become “BULLISH” on 8/29 because the economy was fine? NO!  Bought the 500 Index due to these conditions…Bottom of channel support and a falling wedge and by the way, the fewest investors bullish since the March 2009 low.  NOTHING MORE!

Did I harvest the S&P 500 position and become “BEARISH” yesterday (see post) , after an 8% gain in three weeks, because something is bad about the economy? NO!  Harvested due to Fibonacci resistance at the top of a trading range. NOTHING MORE! 

Did I buy Silver a month ago (see post) because something is wrong with the dollar or that inflation is going to go wild or….NOPE!  I bought Silver on an upside breakout from a favorable pattern,  an ascending triangle . NOTHING MORE!

Why own Emerging Markets or Brazil right now?  Falling channel breakouts!  (See Post)  NOTHING MORE! 

Why own High Yield mutual funds?  A breakout of a flag pattern and above moving averages (see post) . NOTHING MORE!

Why BUY HOME BUILDERS XHB  (see post) when so many people are BEARISH on this industry?  Because of rising channel support plus a sizeable falling wedge after a 30% decline. NOTHING MORE!   (Current gain of over 12%!)

Will we buy the 500 index and other global markets  (see post)  on an upside break of these long-term falling channels? YES!!!

My goal is to try to provide solutions,  that will help investors “inflate portfolios, regardless of market direction by way of the Power of the Pattern!”    I will leave the Bullish or Bearish elements of this business to people much smarter than myself.

Chris


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Bullish….Bearish… or Neither

Chris, on being neitherish, i.e., how he views the markets. – Ilene 

Bullish….Bearish… or Neither

Courtesy of Chris Kimble 

Am I Bullish, Bearish or Neither?

Choice “C”…Niether!

I am of the opinion, being Bullish or Bearish are emotional states of mind.  They are NOT STRATEGIES.  I believe that we should invest in each asset on its own individual merits/patterns, not based upon some global macro prediction.

Did I suggest to buy the 500 index (see post) and become “BULLISH” on 8/29 because the economy was fine? NO!  Bought the 500 Index due to these conditions…Bottom of channel support and a falling wedge and by the way, the fewest investors bullish since the March 2009 low.  NOTHING MORE!

Did I harvest the S&P 500 position and become “BEARISH” yesterday (see post) , after an 8% gain in three weeks, because something is bad about the economy? NO!  Harvested due to Fibonacci resistance at the top of a trading range. NOTHING MORE! 

Did I buy Silver a month ago (see post) because something is wrong with the dollar or that inflation is going to go wild or….NOPE!  I bought Silver on an upside breakout from a favorable pattern,  an ascending triangle . NOTHING MORE!

Why own Emerging Markets or Brazil right now?  Falling channel breakouts!  (See Post)  NOTHING MORE! 

Why own High Yield mutual funds?  A breakout of a flag pattern and above moving averages (see post) . NOTHING MORE!

Why BUY HOME BUILDERS XHB  (see post) when so many people are BEARISH on this industry?  Because of rising channel support plus a sizeable falling wedge after a 30% decline. NOTHING MORE!   (Current gain of over 12%!)

Will we buy the 500 index and other global markets  (see post)  on an upside break of these long-term falling channels? YES!!!

My goal is to try to provide solutions,  that will help investors “inflate portfolios, regardless of market direction by way of the Power of the Pattern!”    I will leave the Bullish or Bearish elements of this business to people much smarter than myself.

Chris


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‘I Love the Delusion of the Markets at this Point in the Cycle’

‘I Love the Delusion of the Markets at this Point in the Cycle’

Courtesy of Michael Panzner at Financial Armageddon 

Since I started publishing Financial Armageddon in late-2006, I’ve often railed against the incompetence and tomfoolery of highly-paid Wall Street "strategists" (note the double quotes). Many of these so-called experts are clueless data-regurgitators or ivory tower economists with above average communications skills. Indeed, it seems to me that most of the "stars" of the forecasting game are simply being rewarded for having the gift of gab, rather than their ability to look past the trees and size up the layout of the forest.

But as with most generalizations, there are exceptions. Surprisingly — yes, I am cynical — a very small number of those who know what they are talking about, have something intelligent to say, and know how to translate their insights into clear and interesting prose have been recognized as such. I am referring in particular to Albert Edwards, the number-one ranked global strategist for I-don’t-know-how-many-years running, and his sidekick Dylan Grice, who placed second overall in the 2010 Thomson Reuters Extel Survey, both of whom are members of the strategy team at Societe Generale.

In his most recent Global Strategy Weekly, Mr. Edwards touches upon two topics near-and-dear to my heart: the real state of the economy and the utter cluelessness of most equity investors [italics mind]:

The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious.

The notion that the equity market predicts anything has always struck me as ludicrous. In the


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The Hindenburg Omen was triggered today!

The Hindenburg Omen was triggered today!

hindenburg omenCourtesy of MICHAEL ECKERT

The Omen finally got triggered today, first, a quick refresher of what the Omen is:

It is a set of conditions that, when met, greatly increases the odds of a large sell-off or crash of the markets. In fact no crashes in the last 22 years have happened without a confirmed Hindenburg Omen. Nevertheless, a confirmed Hindenburg Omen does not guarantee a crash. It only increases the chances of a severe market correction. The probability of a crash since 1985 after two or more HO signals are confirmed is 27%.  On the other hand, without a confirmed HO, Bulls can sleep better at night knowing that most likely they will not awaken to the market being down 10%. 

According to the traditional definition, a "Hindenburg Omen" occurs when the daily number of NYSE New 52 Week Highs and the daily number of New 52 Week Lows are both so high that the lesser of the two is greater than 2.2 percent of total NYSE issues traded that day. Why is this negative? Under normal conditions, there can be large number of stocks, setting new 52 week highs, or a large number setting 52 week lows, but not both. Things become out of balance when large numbers of stocks are setting new highs and new lows at the same time. Having one sector soaring, and another setting new lows is not good in the balance of a healthy market.

Two other sets of conditions have been added to the HO definition to filter out false readings.  Here is a summary of what traders look for in identifying a HO signal:

1-The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows are both greater than 2.2% of total NYSE issues traded that day.

  • The smaller of these numbers is greater than 69. This is a function of the 2.2% of the total issues (as of 7-12-2010, 69 issues are required for the 2.2% rule). Thus if 69 issues are making both new highs and lows, then the 2.2% rule has been satisfied. 

2-The NYSE 10 Week moving average is rising.

3-The McClellan Oscillator is negative on that same day.

4-The new 52 Week Highs cannot be more than twice the new 52 Week Lows (but the new 52 Week…
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Charts From the Future: 5% Rule Update

Yawn!

As I said in our last 5% Rule Update, way back on May 5th, I’m not a big fan of TA.  We have our 5% rule and it serves us well enough but that’s a statistical analysis, not a technical one.  The only TA I put a lot of stock in is Fibonacci Retracements but that, also, is really statistical science and has nothing to do with trying to predict the movement of squiggly lines on a chart

The 5% Rule does NOT tell you which way the market is going.  It does tell you where the resistance points will be.  Of course, knowing that and knowing what kind of bounces to expect and knowing where a proper breakdown or break-out occurs is kind of useful and, when it coincides with the tea leaves that are read by the "real" TA guys – you can really have something good to go by! 

Unfortunately, the 5% Rule is not really a RULE because it requires a cynical background in statistics, especially regarding aberrant values or "outliers" and a general understanding of market history as well as current market events because all need to be taken into account in order to give you accurate "consolidation levels" from which we base out chart movement.

The great Harry Houdini used to enjoy amazing audiences with demonstrations of the supernatural, especially when he would pull back the curtain and reveal the frauds that others were passing off as reality.  That’s how I feel about TA - we can use these very simple scientific "tricks" to project the movement of the market and others can paint their charts and dress them up in whatever language they wish to make it unique but, to me, it still all boils down to the fundamentals with the underlying movement governed by normal regression patterns influenced by capital flows and sentiment. 

Whatever you want to call it, here’s our chart from May 5th, where I said: "So what lies ahead?  Most likely a retrace back to 1,100 (25% of our run) but if that holds and we consolidate a bit, I will be downright bullish.  I will also be impressed if we hold 1,145, which was our last breakout line but, for now, we have a 3.75% drop from 1,218 but a poor bounce yesterday indicates we are likely to get down to a 5% pullback from 1,218 to 1,157 and
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Phil's Favorites

Mr. Morgan

 

Mr. Morgan

Courtesy of 

The Federal Reserve had a precursor before it became the lender of last resort. It wasn’t an institution or a government department. It was a single, solitary man named J. Pierpont Morgan. Mr. Morgan, he was called in the newspapers, and you didn’t need to go any further – everyone knew to whom you were referring.

Stock market panics were common in the early 1900’s because of the agrarian nature of the economy. Each summer, the local banks that catered to farmers throughout the country began calling their money back from the banks in New York City and Chicago so they could raise enough capital to bring in the h...



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Zero Hedge

Anatomy Of The $2 Trillion COVID-19 Stimulus Bill

Courtesy of Visual Capitalist

The unprecedented response to the COVID-19 pandemic has prioritized keeping people apart to slow the spread of the virus. While measures such as business closures and travel restrictions are effective at fighting a pandemic, they also have a dramatic impact on the economy.

To help right the ship, the Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act — was passed by U.S. lawmakers last week with little fanfare. The act became the largest economic stimulus bill in modern history, more than doubling the stimulus act passed in 2009 during the Financial Crisis. ...



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Biotech/COVID-19

The new coronavirus emerged from the global wildlife trade - and may be devastating enough to end it

 

The new coronavirus emerged from the global wildlife trade – and may be devastating enough to end it

Government officers seize civets in a wildlife market in Guangzhou, China to prevent the spread of the SARS disease, Jan. 5, 2004. Dustin Shum/South China Morning Post via Getty Images

Courtesy of George Wittemyer, Colorado State University

COVID-19 is one of countless emerging infectious diseases that are zoonotic, meaning they originate in animals. ...



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Members' Corner

Tinker, Tailor, Mobster, Trump

 

Tinker, Tailor, Mobster, Trump

What happens when a Confidential Informant becomes President?

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

...



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Kimble Charting Solutions

Fear Indicators Creating Huge Bearish Reversal Patterns This Month?

Courtesy of Chris Kimble

Its been a rough month for Stocks and Crude Oil. Could these two indicators be suggesting that a panic in fear has run out of steam?

This 2-pack looks at the fear indicators in the Nasdaq (VXN) and Crude Oil (OVX).

Both were at the highest levels in years back in 2008. Both peaked in 2008, as they created monthly bearish reversal patterns.

Turing the page to March of 2020, the Nasdaq fear index could be double topping at t...



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Insider Scoop

Strategist Channels His Inner Elsa, Says Apple Investors Need To Let It Go

Courtesy of Benzinga

The "Frozen" character Elsa famously declared it's time to "let it go" when her dark secret has been discovered. Boris Schlossberg of BK Asset Management has a similar message to Apple Inc. (NASDAQ: AAPL) investors.

'Absolutely' No Discretionary Spending

The market is guilty of "utterly underestimating" the ultimate economic impact the ...



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Chart School

Big moving Averages and macro investment decisions

Courtesy of Read the Ticker

When price is falling every one wonders where demand will come in.


RTT black screen Tv videos study the simplest measure of price (simple moving average). What has happen before guides us now. 














Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann Angles, ...

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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



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ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.