A Tradable Edge
by Chart School - April 9th, 2010 4:28 pm
A tradable edge
Courtesy of Allan
On April 1, the GLD Daily Trend Model flipped long, with GLD closing on that day at 110.26.
One week later, GLD is above 113, for about a 3% gain. This gain may not look like much on the above chart, but the near-term at-the-money calls are up well over 100%. The Buy signal didn’t come in at the very bottom, but it did come in early enough in the GLD rally to generate some nice gains. The same can be said for the three other signals shown on the Daily chart above. I like the way these signals perform, not perfect, but a tradable edge.
What now? Hold your gold. It’s in an up trend. Same thing for financials.
Financials and the market
FAS is a triple leveraged ETF for financial services stocks. Its hard to imagine the market suffering any kind of sustainable decline with this kind of strength:
The How to Spot Trading Opportunities eBook features 47-pages of easy-to-understand trading techniques that help you identify high-confidence trade setups. Senior EWI Analyst Jeffrey Kennedy shows you how some of the simplest rules and guidelines can be used as powerful trading tools. Created from the $129 two-volume set of the same name, this valuable eBook is offered free until April 23, 2010.
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Dow’s Theory of Markets
by ilene - February 16th, 2010 10:38 pm
Here’s the second chapter from Pharmboy’s “Handbook of Technical Analysis.” If you missed the introduction and first chapter, click on “Understanding Market Cycles: The Art of Market Timing” to read from the beginning. – Ilene
Dow’s Theory of Markets
Courtesy of Pharmboy of Phil’s Stock World
Technical analysis dates back hundreds of years. According to historical records, a great Japanese rice trader named Homma Munehisa (1724-1803) developed a form of TA known as candlestick charting.[1] A candlestick chart is a style of bar-chart used primarily to describe price movements of securities, derivatives, and currencies over time. It combines aspects of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in TA of equity and currency price patterns.
Technical analysis is an art. With focus and diligence, TA can often be learned within a short period. A chartist using TA reads and interprets chart patterns and then attempts to predict the most likely short-term outcome based on his methods. Figure 1 shows a 6 month Diamonds (DIA) candlestick chart and many patterns and studies that traders often use to enhance their trading. Moving averages convergence divergence (MACD) and relative strength index (RSI) are two studies very commonly used by technical analysts. MACD is a trend-following momentum indicator that shows the relationship between two moving averages of prices, while RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in trying to decide overbought and oversold conditions of an asset. Because candlestick charting is the basis of this handbook, I use these types of charts almost exclusively in my examples.
In the U.S., TA first gained a following from Charles Dow’s Dow Theory in the late 19th century. The six basic tenets of Dow Theory, as summarized by Hamilton, Rhea, and Schaefer, are as follows:
Tenant 1. The market has three movements (Figure 2):
- The primary trend, or major trend, may last from less than a year to several years. It is bullish or bearish.
- A secondary trend moves in the opposite direction of the primary trend, or as a correction to the primary trend. For example, an upward primary trend will
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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...
Ilene is editor and affiliate program
coordinator for PSW.