I don't like what I see. On several charts, we have started to form a falling wedge. First the hourly chart:
Notice how the down side action failed to follow through to the bottom of the down channel? Also, note how the reaction highs failed to carry to the top of the down channel. These failures show that the market is starting to think twice about the current trend. The presence of the wedge is considered bullish.
Now the 5 minute chart for the day:
Note how the setups I suggested yesterday did play out - unfortunately very quickly. I did manage a short at location A at around 1042 and I did get to play it for a couple of points, but got stopped very early and did not get the full ride to B at 1037. News then sent the index rising too quickly for me to enter a long at the 1043 (point C), and I missed the long ride to the days high at D - 1052. I hope someone did a better job with these setups than I did.
Anyway, the real problem developed when we started the wedge pattern on the 5 minute as well. This is a bullish pattern - and suggests we may be at the end of the latest down trend. I think we can expect that right shoulder to form this week. From here on out we look for a breaks first in the new wedges, then in the old down channel. This applies to both the long and short side of the equation.
Setups later...
8 comments:
David O-
Great TA as always. Your analysis really helps give me a framework for trading within. I held some shorts overnight and got stopped out by those but when I saw the resistance at near the upper end of the channel I went short again and made up my losses. Then reversed field when I saw the resistance near your support line of the channel. I think I'll close out tonight and just see what tomorrow brings. From the looks of your TA a long position near the bottom of the wedge (with a medium stop) might be a good play from here.
Thanks--of all the websites and trading methods I've researched I'm most inspired by your TA. Hope to emulate it.
J
Hi David , I did a terrible job playing out today,
I see the descending wedge , I am told they lead to a up shot 65% of the time or so.
I do have to point out we made new lows today.1029.38 and 1052 did sharply turn us away.
This could be what happened today
could have been a ABC single inverted zigzag
The rise to the 52 area was A.
The drop 29 was B , the move to 42 was the start of C , if that is the case we should rise as high as 70ish and scare every bear out of there shorts again. That could take more than one day to unfold.
and could zigzag some more but there is not alot of room in the wedge.
My Best
hi david.. thanks again for the ta.. looking at the wedge on the hourly chart, it seems like the trend reversal will most likely happen tomorrow doesn't it?
after getting anally reamed Friday, I went long at 38 (too small, sold too early) went short at 51 (big position, caught 7 points) then long at 30-33 twice. I was too scared to hold today; I might be better off staying scared or simply introducing stop loss that will no doubt screw me 80% of the time. I keep hearing too much crap from people predicting what is going to happen, though, and I have trouble sticking with a position. Like many, I think we'll see some upside, but I don't think we're headed for 1070 quickly.
payline does, but he is relying on EWT, which is a sure way to the poor house. sol at xtrends does, and i don't bet against him. Tim Knight does not, but I think he and some bears might get reamed out by the financials in one last squeeze. Otherwise, I might start ignoring Teddy. he is never right other than daytrading.
My own personal opinion is long term and fundamental, and I ignore it. At some point we will come down hard, but it will likely be extended and largely untradeable.
There is a gap at about 65 from Friday , 70 may be strong but filling that gap is likly
two more cents:
DJIA is still in the process of confiriming/accepting the 50d SMA or rejecting the 25d SMA (seems to have rejected 10000). All the other averages are trashing around during this period. What is bad is that it is -300pts from DJIA 9789 to the neck line of the tentative SHS pattern. Not much fun.
Hey Texas,
Thanks for the acknowledgement. I am inclined to believe we are headed higher short term. A good rule is to play upper and lower trend lines until they break.
Hey Payline,
You and I both screwed it up today it seems. The action was just too quick for me to act and just choppy enough to make trailing stops impossible. What a mess...
The falling wedge is generally bullish - though there is a slightly less chance that it could become continuation. I see your ABC wave, perhaps it has significance. I think we have serious tests at 053, 066 and 073. I am hoping for the shoulder to form and exhaust through that range. Then we may see the H&S on the S&P form.
Hey Devon,
The fact that we closed at the top end of the wedge on both the 5 minute and the hourly does suggest that we may shoot higher starting tomorrow. We have to see. The key is to trade the breaks up if they occur with volume.
Hey KPH,
It is tough to trade with many opinions. I find myself second guessing my analysis after reading other posts. For this reason, I have eased off some of my intra-day comments at HMS. I have nothing but respect for the posters though - Teddy is talented at his intraday calls but I am not a fan of black-box systems that mysteriously tell us the bias of the day - even if they work well! Who knows, maybe my approach is too old school...
I have to say that I disagree with you on your EWT bias. I am by no means suggesting the EWT is the end all of analysis, rather it does play out in many situations and many timeframes. I hesitate to apply it at the larger time frames - I think it is much more relevant during intraday rally bursts and sell-offs.
Hey Bob,
I'm watching the DOW carefully now - as you are correct, the other indicies await the DOW to catch up.
Thanks for the comments folks. I still plan to post some setups tonight.
David:
re: "maybe my approach is too old school..."
NEVER!
IMHO technical analysis works because of two things: the fundimentals, whatever they maybe at a particular point in time, are built into the price action and the technical analysis patterns are based on human psychology that is genetic. Of course each pattern has a percent reliability associated with them. And that is were highly skilled people like you excell.
As an engineer I see the same thing, the new wiz kids crank out a black box analysis tool that does not always work. And when you dig inside the box to see what is going on you find its all junk.
David, do us all a favor and keep up the great work!
PS DJIA is a real headache right now, I hope it is not able to pull the other indices up.
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