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

How to make fragile global supply chains stronger and more sustainable

 

How to make fragile global supply chains stronger and more sustainable

Shipping containers are moved from the Fairview Cove Container Terminal In Halifax in May 2021. THE CANADIAN PRESS/Andrew Vaughan

Courtesy off Adel Guitouni, University of Victoria; Cynthia Waltho, University of Victoria, and Mohammadreza Nematollahi, University of Victoria

...

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Digital Currencies

Ethereum: the transformation that could see it overtake bitcoin

 

Ethereum: the transformation that could see it overtake bitcoin

The crypto wars are hotting up. Wit Olszewski

Courtesy of Daniel Broby, University of Strathclyde

The world’s second most valuable cryptocurrency, ether, has been touching all-time highs in price ahead of a major upgrade of its underlying platform, ethereum. Ether is currently worth in aggregate just shy of US$500 billion (£363 billion). That’s still slightly less than half that of the biggest cryptocurrency, bitcoin.

...

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Zero Hedge

Another Massive Short Squeeze Leads To Spectacular 5Y Auction

Courtesy of ZeroHedge View original post here.

Similar to yesterday's stellar 2Y auction, which many were worried would see a drop in demand only to be silenced by the burst in demand due to a furious scramble for physical paper on the back of a record front-end short (which we previewed earlier in the week), so a quick look at just how special the 5Y TSY had become ahead of today&...



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Politics

Trump wants the National Archives to keep his papers away from investigators - post-Watergate laws and executive orders may not let him

 

Trump wants the National Archives to keep his papers away from investigators – post-Watergate laws and executive orders may not let him

Nixon resigned after tapes he had fought making public incriminated him in the Watergate coverup. Bettmann/Getty

Courtesy of Shannon Bow O'Brien, The University of Texas at Austin College of Liberal Arts

The National Archives is the United States’ memory, a repository of artifacts that includes everything from half-fo...



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Biotech/COVID-19

An infectious disease expert explains new federal rules on 'mix-and-match' vaccine booster shots

 

An infectious disease expert explains new federal rules on ‘mix-and-match’ vaccine booster shots

Discuss with your doctor whether or not you need a booster – and if so, which vaccine will work best for you. Justin Sullivan/Getty Images News via Getty Images

Courtesy of Glenn J. Rapsinski, University of Pittsburgh Health Sciences

Many Americans now have the green light to get a COVID-19 vaccine booster – and the flexibility to receive a different brand than the ori...



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Chart School

Price and Volume Swing Analysis on Bitcoin and Silver

Courtesy of Read the Ticker

Many take guidance from news, pundits or advisors. Well sometimes the swings of price and volume are a better measure of what happens next.

The big boys do not accumulate or distribute in single 1 second trade, they build positions over weeks, months and years. They use price swings in the market to build or reduce positions, and you can see their intent by studying swings of price and volume and applying Tim Ord logic as written in his book called 'The Secret Science of Price and Volume: Techniques for Spotting Market Trends, Hot Sectors, and the Best Stocks'.

Tim Ord is a follower of Richard Wyckoff logic, his book has added to the studies of Richard Wyckoff, Richard Ney and Bob Evans.

Richard Wyckoff after years of...

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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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.