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Showing results for tags 'candlestick analysis'.
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Good Morning All; Of all the articles I have written, my favorite articles are ones that bring out some of the subtleties of chart patterns that many new traders may miss. But the purpose of this letter, "Eyes", is not to 'teach' technical analysis; that is what our seminars are for. That is why perhaps the most helpful articles, for those that listen, are the ones that talk about how to go about learning the business of trading. Through the Cracks That is correct, the business of trading. It is a business like any other. True, it does not generally involve employees or large facilities for most traders. But it does involve education, planning and preparation. Traders need to be educated in the method of making money in the markets, as well as all of the surrounding concepts that are needed. They need to plan the business in the big picture by opening accounts, allocating money, figuring out living expenses for a period of time, allocating the proper time and money to the new venture, allocating money to initial and ongoing education, as well as many other important issues. Traders also need to prepare for each and every trade by forming trading plans and proper follow up procedures, and the proper research for their trade. Let's take a harder look at the first concept; getting an education in the markets, as well as all of the surrounding concepts that are needed. Deciding what approach is right for you; fundamental or technical, long term or short term or both, using news or not, understanding how to use platforms, how to enter orders, what types of orders should be used, understanding what actually moves prices, and the 'math' of making money. It should seem obvious that everyone would have a handle on all these topics before risking capital in their new business. But experience tells me nothing could be further from the truth. Learning the actual concepts of technical trading is what our Trading the Pristine Method seminar is all about. But that course is about understanding price movement; how prices go through stages, transitions, and how to play those movements to make money. Plus a whole lot more. But many of the other concepts are things traders need to understand but often don't. Many are touched on in seminars, but some are not. It is expected that traders will learn from our free webinars, or from their broker, and maybe some are even in the 'common sense' category. Many important items seem to 'fall through the cracks'. Sitting in the Pristine Method Trading Room, I am often mildly shocked at some of the things that 'experienced' traders ask. To that end, we have created a new course, "Online Trading Essentials". It covers many important topics. If you are looking at a career in the markets, or if you have recently begun pursuing that opportunity, this class is a must. I also feel 'anyone' would enjoy the class. It is free to current clients who have attended a seminar. If you are currently talking to your counselor about becoming a client, see if you can get into the class for free. Closing Comments Paul Lange Vice President of Services Pristine Capital Holdings, Inc. Day Trader School
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Good Morning All; Last week I began discussing a definition of trading. Today we are going to discuss how newer traders often define trading, and the process they go through to get there. What is Trading? Part 2 of 2 Many people 'invest' in the market by placing a 'bet' on the future of the stock market as a whole (usually the bet is that the market is going up). For those who decide to make income by actively trading, they usually feel the market is easy. They have been inspired by a great (or not so great) book, free seminar, or 'infomercial'. They have heard of great success, been introduced to a strategy that worked one time, and feel that since they are clearly above average in both intellect and perseverance, this stock market game will just be another conquest. Their definition of trading is likely along the lines of 'buy low and sell high, over and over again to produce a profit'. Soon after trying the concept that they learned which had introduced them to the market, they become frustrated. It is not working. They have probably justified many reasons why it is not working, and have concluded that to truly master the markets, they need more information. Therefore, they go on the crusade to become experts at everything. They read Barron's, IBD, Fortune, and Money. They study all terms learned on CNBC. They become an expert on all news and economic numbers. Suddenly the party conversation becomes analyzing the last 'book to bill number' or how foolish Greenspan was or Bernanke is. The quest now becomes to find stocks that they have determined to be 'undervalued', based on the superior knowledge they now have. Their definition of trading is now likely along the lines of 'looking for obvious overvalued and undervalued situations to capitalize on'. Soon they discover that 'undervalued' does not mean the price has to rally. If it does rally, their timing may be so far off, being 'right' did not matter. They also find they are not 'right' very much. They also discover that 'undervalued' goes hand in hand with 'really weak' and they are now starting to think that they are still missing something. They are also getting frustrated. This was supposed to be easy. Most still view it as easy at this point. They simply have had some bad breaks, rotten timing, poor luck, and naturally needed to overcome some growing pains. Unfortunately, it is at this time that they become most susceptible to the prey of the 'Holy Grail' vendors. Those who are selling products that are 'guaranteed' to make you money by following a simple 'how to' manual. When this crosses that, buy; when this changes color, sell, etc. Their definition of trading is now becoming blurred, and they start to think about many in depth questions about 'fundamental versus technical', about using 'technical indicators'. Desperation and lack of confidence often sets in and the definition of trading is sounding more like 'buy whatever the newsletter or market guru says'. If this flow sounds shockingly familiar, do not be surprised. At some point, a few will wipe the slate clean and seek out an 'education'. To learn to think for themselves and evaluate what is happening, not what they are being told. They come to understand that trading is a complex ever-changing environment that requires understanding as only derived in a total learning process. Below is the definition we gave you for 'trading'. If you read over it lightly yesterday, take another look today. "Using technical analysis to find a moment in time when the odds are in your favor. Then it becomes a matter of entry and management. In other words, it is having the KNOWLEDGE to know when the odds are in your favor, having the PATIENCE to wait for that moment, then having the DISCIPLINE to handle the trade properly when it goes in your favor and properly when it goes against you." Paul Lange Vice President of Services Pristine Capital Holdings, Inc.
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Last week, the broader markets broke out above their current resistance areas and S&P 500 finally joined the all-time high list. With no area of prior price resistance above, it's safe to assume that the markets will be continuing their march to higher levels. Finally, mutual fund investors that bought into the market at the highs in 2000 or 2007 and suffered long through 50% decreases and slow recoveries will see a gain on their investment. Happy times are here again!!! Hold on a sec., it's not that easy. As students of the markets and educated investors, swing traders or day traders, we don't assume anything. Following the trend is the simplest approach there is, and it works. However, human nature being what it is, without an objective method of determining the underlining strength or weakness and sentiment of the markets. We are more likely to ignore or rationalize the warning signs of change or the actual trend change itself when it comes. Of course, this assumes you have a method of doing that. I have seen enough trending markets to know that they always go further than you think they will. They continue their move until they have rung out the last few doubters and I think the markets now will do that with this uptrend as well. An example of a trend that moved beyond what the majorities believe was possible is Apple (AAPL). It moved from 100 a share to 300, 400, 500, and then 600! The doubters were rung out. At 700 there were few that doubted it wasn't going higher. Then when the turning point came; well, it's a temporary stall. It will be back to new highs shortly. Maybe it will at some point, but AAPL is now down 40% from its all-time high and still showing relative weakness to the broader markets. The greed and fear that comes with being human cannot be stopped. AAPL investors are realizing this now, but with an online trading education you can empower yourself to overcome that human fault as it relates to investing your money in the markets. Here is what I am looking at now to guide me about the recent move higher in the broader markets. n the above chart, I've put together four market index ETFs. The S&P 500 ETF symbol SPY, the Nasdaq 100 symbol QQQ, the Transportation index symbol IYT and the Russell 2000 index symbol IWM. I also have two market internal gauges. The McClellan Oscillator, which is a measure of market breadth and a Put/Call ratio with a 5-period moving average of its closes. We have many markets that have made all-time highs (not shown other than SPY) or have broken out above resistance like the Nasdaq 100. However, IYT did not move to new all-time highs with the recent move higher and is under its resistance. IWN also could not move to all-time highs and is under its resistance area. Historically, these two indices not confirming have been warning signs of underling weakness that preceded a market correction. It's too early to say these two indices will not move higher above their respective resistance areas, but should they establish lower highs and move toward their recent prior lows, it will be a bearish signal. If they move above their resistance areas, it's happy days - onward and upward! The internal gauges shown here are neutral. The McClellan is near zero and the 5-MA of the put/call ratio is in the middle of the range, so no guidance there of a turning point. However, those typical "wrong-way" option traders immediately jumped to buying puts (bearish bets) Friday. This is a short-term bullish sign that supports the breakout last week in SPY and QQQ and a continuation of that strength last week. That strength was not confirmed by all indices, so we have divergences that are concern. However, with option traders that are historically wrong and betting that the markets will move lower, the divergences are offset by those excessive bearish bets. With this, I'll be neutral over the next few days, but siding with the breakout to continue higher. Greg Capra President & CEO Pristine Capital Holdings, Inc.
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Good Morning All: As traders enter the arena, they are always full of questions. That is a good thing. As they progress, traders have even more questions. When they start to get good, they have even more questions. The trader always feels that they have good questions, and that their questions are also unique, things that only they would think of after the long journey they have been on. While it is true that all these questions are 'good', they are far from unique. As a matter of fact, it seems that we all end up on almost the same exact path, running into the same questions, in search of the same answerers. For a long time I have been known to say, "I have not heard an original question in years". I say it because it is true. We all go through the same process, which brings about the same questions. There was an exception once. A few years back, someone asked a question I actually had not heard before, and truthfully, have not heard since. Someone very simply asked, "How do you know when it is time to quit?" When to Quit Believe it not, this caught me by surprise. I am not use to 'new' questions. However, just as surprisingly, an answer came out of my mouth instantly, and without even thinking about it. I said, "When you can no longer do what it is that you know you need to do". Surprising answer? It actually is the perfect answer. When a new trader starts out trading, they usually try to begin with no education or with very little education. If this is the case, struggle will be expected and be the norm. The answer at this point is not to quit, but rather to get a quality education. At the next phase, traders take all this valuable information, and while they feel great about it, they often do not use it well. They do not have a plan to assimilate the information, so it is used inconsistently or not at all. They usually do not even know they are doing this, they 'think' they are doing things by the book. The answer at this point is not to quit, but rather to develop and use a trading plan. At the next phase, traders write a plan, but there are several problems. The plan may be just words on a paper done just to accomplish this step, but have little real meaning. Or it may have meaning to the trader, but has never been tested so may actually be an ineffective plan. Or, the trader may have a good plan, but is not following it. Traders rarely follow their plan, and rarely realize that they are not following it. The answer at this point is to check your plan, and follow up on your actions to see if you are following your plan. If the plan is not effective, change it and/or seek help to make it more effective. Paul Lange Vice President of Services Pristine Capital Holdings, Inc.
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Good Morning All: Over the years, Pristine has become a pillar in the education field. Pristine began training ordinary people about the financial industry in 1994 and has a perfect reputation for quality and honesty in presenting the best material, with the best instructors, and with the follow-up to ensure students have every opportunity to go on to make money. People new to trading or investing may not appreciate all that goes into that. In an industry that sometimes gets a bad name by companies that are dishonest and offer sub-par training, it leaves many people asking the question: "Who can actually do this thing we call trading or investing?" Who Can Do This? Let's get right to the answer. Anyone. Anyone can do this. Not everyone, or everyone would, but anyone can, and relatively simply. Here is what CANNOT be done. We, as well as anyone else, cannot show you a magical technical indicator that makes money. There is no such thing. If there were, it is all I would use. We cannot show you a kindergarten system that makes this as simple as "red light - green light". These claims are insulting to professional traders all around the world. We cannot guarantee that any ONE person will be successful at this. I know of no college that guarantees their graduates will be successful. The college supplies the tools, but the student must put them to use. Here is what we CAN do. We can supply you with the best education that gives you all the tools you need to make money in the market. It IS very doable. Here are some interesting things you should know. 1. You do NOT need any special background. In fact, the less background you have in the financial world the better. I have always said that my favorite student would be a 13-15 year old teen-ager who likes video games. 2. You do NOT need an advanced education. "The world is full of educated derelicts" is a famous quote form Herbert Hoover. The complexity of what is needed to make money can be learned by junior high students. Many people make money shortly after our two day seminar. 3. Once you learn the method, you do not need to spend time dissecting or even listening to financial reports, earnings statements, or news stories. They are all irrelevant. 4. You do not have to compete with big boys on Wall Street. Many places teach the wrong methods. We like to ride the coat tails of big money, not compete against them. There is no other way. 5. You can easily beat the big funds. Billions of dollars cannot be moved around quickly or efficiently. In fact, they are forced to resort to very passive long-term buy and hold strategies that have been proven to not work. 80% of funds underperform the market. The confusion arises because hucksters looking to make a quick buck make this look 'too' easy. People forget what 'trading' is. It is a profession. It is an occupation. And like any other, you don't buy your degree on line with a piece of software and you don't earn your degree reading a book or watching a single DVD. You do earn your degree buy getting educated by professionals, testing what you know, and making adjustments if you did not apply the information properly. This information is the same but everyone is different. Think of any university. The same information is taught to all. Some go on to be top-notch lawyers, doctors, and scientists making the highest salaries out there. Some do well, but are not the highest paid. Some don't make it. Can the ones that don't make it say that what they learned was incomplete? Paul Lange Vice President of Services Pristine Capital Holdings, Inc.
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Have you ever been excited about a new experience? Maybe heading to the golf course for the first time or going to the go-kart track to show your stuff? Do you remember the butterflies and excitement building inside as you near this new experience? It's common to have such exhilaration when a new experience arises. Just imagine with me for a moment, that you were going to have some weekend fun with the family at the go-kart track. As you seat yourself into the kart your smile is ear to ear. You feel the butterflies fluttering as you rev the gas getting ready for this experience. Prior to taking off, you glimpse over and notice your family giving you the thumbs up, chanting things like go dad, you can do it, you can take these guys, show them who's boss. Suddenly you realize your eyebrows are lowering, your smile moves to a determined grit and you now have something to prove. This is not a fish story about the one that got away; you have a live audience! This friendly little driving around the track has escalated to the Daytona 500, so it seems. You move onto the track with fierce determination and no experience I might add. That's ok, how hard can it be, I drive to and from work every day and have never had so much as a fender bender. You move around the track like you're the only one there and suddenly you get squeezed out and your kart slams into the tires. As if that is not enough, you get rear ended from another kart. That actually hurt. With pride on the line, you immediately get back into action only to have a similar experience. This one could leave a mark! Now intimated by this new adventure and in a great deal of pain, you finish your ride and force your smile every time you near your rooting family with the bulk of your thoughts concentrating on when this ride will be over. I share this story with you to press upon you how most people enter the trading environment. Excitement turns into determination which often leads to pain. If you FIRE before you AIM that is... The bulk of new traders will embark on their new career this year that is similar to the story above. They fail to practice, and get kicked around and 90% of them will not exist as a trader in 12 months. They have told all of their friends about their new career and when they ask how things are going they shrug it off with "The market is not right yet" or some other excuse that is just as poor as the first one. You see, people that want to start trading to offset their income or potentially make a career of it have no business entering the trading environment until they get education and practice. The title of this article is how most people attempt everything. They get READY and FIRE before they know what they are really AIMING for. Some ventures may be forgiving but Wall Street takes no prisoners. It will under-handedly seek out anyone with little to no experience or practice and make sure you end up in the tires. Do not let that happen to you! Do you walk over to the fireplace and ask it "If you give me some heat, I will give you some wood"? No, it doesn't work that way, nor does trading, and you absolutely have to get education FIRST. Many people only have one shot at this, burn through your capital before education and you may never get the opportunity to share what is one of the greatest businesses on the planet. I mean think about it, a business that you can work anywhere in the world with just a laptop and a internet connection; a business with no employees, no overhead, no inventory, etc... etc... Most businesses exist for 11 months to pay the bills and employees, only to make a profit in just one of the twelve months. Your trading career should not be taken lightly especially when you think about what you have your hands on. You should not open a business without education and training, so why would trading be any different? Trading potentially could give you more freedom and enjoyment than you could possibly imagine if you take the right steps to succeed. If you were to open a franchise do you think you could do that before you spend the required time practicing and learning the proper procedures? Not a chance! Seek education, practice and have the desire to win, so you don't get "pushed into the tires". Get READY - AIM -FIRE!!!! Traders' Tip: Pristine education is the single most proactive ingredient one could learn prior to risking capitol in trading. The Pristine Method has been proven time and time again as a technical approach that has been developed and time-tested over the past 18 years by Pristine. This dynamic trading methodology is now used by professional and semi-professional traders all over the world. Make sure to register for any of our other FREE programs that interest you the most. I would be happy to see you join us and to answer any questions you may have. Jeff Yates Contributing Editor Interactive Trading Room Moderator Gap, Intra-Day and Swing Trading Specialist Instructor and Traders Coach
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If you're not aware that the markets have been going higher and nearing all-time highs, you must not have a television. Finally, the media has noticed the bull market that started from the 2009 crash low. Now, that drop and low was about as ugly as it gets and of course, we really didn't know that it was 'the low" until a bit later. However, the markets have been going up for just over four years and the media is just getting excited! The saying, "Better late than never" doesn't always apply when it comes to the markets. With the markets late typically means losing money, but can it be different this time? I am seeing some not so obvious signs of change that could be signaling that this market has a way to go in the long-term. There has been a huge amount of money pumped into the system to hold off recession, deflation and bankruptcy of countries. We can logically assume that the equity markets believe that it has worked since most are at or nearing all-time highs. However, the fact that interest rates have been in a decline for years tells us there has been little demand for that money for business investment (higher risk, higher rewards). Rather, a lot of that money has been going buying bonds (low risk, low reward), which causes interest rates to drop. During times of economic expansion the demand for money increases (borrowing) and interest rates rise. The charts are starting to point to this. The above being said, long-term interest rates have been in an overall downtrend since the early 1980s. However, during times of an improving economy those interest rates have risen within that very long-term downtrend. So interest rate movement up and down is relative to this. The above chart is of the ETF symbol TBT, which is for being short bonds prices and interest rates moving higher. In it, we see a classic pre-bottom free-fall drop on high volume, a lower low with less momentum and low volume and a retest of the low with an increase of volume. The next step would be to move above the most recent highs. As explained above, a move higher in interest rates suggests a pickup in business and the economy. If that is the case, then stocks that are affected by that like industrial metals would have been under performing and should now move up with interest rates. Let's look. The chart of United States Steel Corp. (X) looks very much like the chart of TBT. Not surprising. If interest rates move up (bond prices down), I think that X should have a minimum potential to move to the 30 area. If the economy is at a significant turning point, and I hope it is for all of us, the potential for X is much higher. You now know the inter-market analysis to monitor. Alcoa Inc. (AA) is a manufacture of aluminum, which is used in planes, cars, construction and even the foil that you use in the kitchen. As you can see, its chart is also similar to that of TBT and X. If one moves higher they all should. These bottoming patterns do take time and when they move higher they typically don't do it with a lot of speed until others take notice of the movement. Especially, the media that are just starting to realize that the markets are really going up! This not so obvious sign of change is encouraging after such an extended period of bad economic times. It's early in the turn and false starts (bottoms) do happen. Right now the charts are pointing to better times for everyone and the potential for more people to make money. In the prior Chart of the Week (COTW), I showed you a simple approach to market timing. It has not given a sell signal, but don't stop monitoring those internal gauges. It may take the market blasting higher to get those option traders all-in. If we get that sell signal, remember this is a short-term signal. We will need more information for any long-term change of bias and with what I have explained in this COTW, that change isn't likely should TBT, X and AA move higher. PRISTINE - A Trading Style, Often Imitated, But NEVER Matched! All the best, Greg Capra President & CEO Pristine Capital Holdings, Inc.
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As we near the end of the year, here is a look at the long-term to put the short-term gyrations in perspective. For the very bullish case, you want to see the markets consolidate at the top of the range. That is likely to be months. Pullbacks ideally hold the area of first support. A move to the area of second support makes the bullish case very questionable and would at least suggest a much longer period of consolidation. For the ultra-bearish, a clear break below last support, and tent-housing communities could be high-end living for many. All the best, PRISTINE - A Trading Style, Often Imitated, But NEVER Matched!!! Greg Capra President & CEO Pristine Capital Holdings, Inc.
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Trading is one of the most fascinating, challenging and rewarding businesses on planet earth. But it perplexes me to hear the vast and varied vehement opinions from the bulls and bears in the media and elsewhere. Are they trying to talk themselves (and their followers) into being correct to save their ego - and wallet? Are they trying to become heroes by saying, in retrospect, that they "nailed" the market direction? (Note: you will only hear from that minority after the fact, with most disappearing into the night.) The Pristine Trained Trader (PTT) focuses on the only thing that matters: objective candlestick price and volume data. Period. Pristine President and CEO Greg Capra, confidently and succinctly states it this way: "It is what it is. You must react to what is happening in the moment, or you will be trading in the past, in a 'mirage'." Traders are bombarded daily with market opinion from a plethora of other traders, analysts, and commentators, all offering their opinions on stocks and market direction. And so many of these traders struggle with this deluge of information, trying often - in vain - to make an objective decision by processing massive amounts of subjective data. My approach is direct and simple: give me a compelling chart setup and sufficient liquidity, and I will trade anything that moves - just ask my students! In the bigger scheme of things, the source of the news is irrelevant to me, unless, of course, it gives me insight into other stocks or sector plays. The market offers tremendous opportunity for you to assert your views through money -- through your buy and sell orders. So when I hear these people touting their view and stocks, my immediate reaction is, "Blah, Blah, Blah. Just hit the mouse." Point your mouse to your order execution module in your trading platform and hit either the buy button or the sell button. That's it. If you think a financial instrument is going higher, buy it; if lower, short it. When all is said and done, price movement will dictate who made the correct choice. Unfortunately, the financial markets are designed for only the minority to win consistently -- not the majority. The uneducated public is unfortunately part of the latter group. I want to be buying when my technical analysis shows that demand is overtaking supply with the larger time frames on major support. When the stock becomes well known after a robust rally, good company news, and even becomes the cover story on some business or financial publication, that is the time to sell at the first sign of slowing momentum. Jeff Yates Contributing Editor Interactive Trading Room Moderator Gap and Intra-Day Trading Specialist Instructor and Traders Coach
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Many of you know that I have a back ground in Stock Car racing. The more I think about it, the more I see similarities that racing and trading the markets have in common. Particularly that they both require intense focus. I was thinking back on my racing days and I remembered a statement that my crew chief made to me. That statement not only gave me the edge in racing but virtually in every other venture that I was a part of. Are you ready for that magic set of words? Well, I think it would be prudent for me to explain a few things first. You see, in racing, you are rewarded for being fast, having cautious aggressiveness and being the most consistent; in addition, everything is measured in fractions of seconds.... In some cases the decisions you make, or don't make for that matter, could injure you or even worse, could be fatal. When you hear these words that I am going to share with you, it may not make sense at first but experienced individuals know how important this is. OKAY, are you ready? My crew chief said to me, "Jeff, if you want to go fast you have to slow way down." Now you can just imagine the confusion on my face when I was told this. I think my exact response was, "Huh?" He went on to explain to me that to be fast, you need to slow down in the corners so that you can set up the car for the exit. Most people drive off in a corner and man handle the car and as a result, they have a poor exit. By simply rolling into the corner rather than driving 100% into the corner, you will have more momentum in the majority of the track, which is in the straight away. I finally began to understand this concept and since then, I have applied it to many things in my life. So, here is the big question... How does this apply to trading the markets? Many people that are embarking on a new career want the experience of success," YESTERDAY"! They "rev up" their trading account and go full-speed into the corner not giving any consideration to consistency. They don't even know what their car has under the hood. They start buying and selling stocks as if they were selling tickets to a Broadway show. No strategy, no plan, just pure adrenalin and emotion. Most new traders feel that if you are in the trading business, you should be trading; not sitting and waiting. Unfortunately, a very high percentage of new traders never make a proper exit off the corner. Man handling their trading eventually causes them to end up in the wall, and I don't mean Wall Street. If they would just learn how to roll into the corner (paper trade) and set their car up for the exit (proper education FIRST) they would learn how to pass the majority of people down the straight away. I had a conversation once with racing legend Bill Elliot who has gone down in history as one of the most winning drivers on the NASCAR circuit. This is basically what he told me: "Jeff, if you were to paint a line around the track where your front tires are tracking, the goal would be to only focus on hitting your marks." He went on to say "Sloppiness or inconsistency of your line around the track is one of the most damaging things a racer can do." That made so much sense to me the more I thought about it. So many people spend so much time looking for the better way around or a better system that they lose the peril and momentum of consistency. By the time they find their "line" (the Holy Grail that does not exist) they have already used up their equipment. You do not need to trade 20 or even 100 trades per day to be a trader. The professionals ARE NOT TRADING the majority of the time, they are just following their line (only taking their setups and not looking for the newest and "better way" to make a lot of money in the markets.) The sooner you learn and understand that taking less trades with more consistent setups is really the only way to achieve financial rewards in day-trading, the sooner you will be on your way to consistent profits. Jeff Yates Contributing Editor Interactive Trading Room Moderator Gap, Intra-Day and Swing Trading Specialist Instructor and Traders Coach
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In the Chart of the Week (COTW) dated Monday 9/17/12, I showed you why a short-term correction was near. This was regardless of the bearish October Phenomenon. As I said then, the time of year alone is not a reliable guide without other factors being in alignment. Those factors are - the right price action and speculative bets being placed on higher prices. In that COTW I showed that this was happening and it virtually insured a short-term correction was close. As we know now, Friday 9/14/12 was the high day of the current move. If you would like a copy of that COTW you can e-mail me at greg@pristine.com or e-mail counselor@pristine.com for it and it will be sent to you. In the chart above, the S&P 500 is displayed by the ETF symbol SPY. The bulls attempted to hold the prior low in the 143 area of SPY last week, but could not. With an area of Major Support (MS) in the 140 area, it's an obvious place to except a bounce from. Ideally, prices would drop straight down into it similar as they did from early last week. This would create a small Pristine Price Void (PPV) for prices to bounce up into. Assuming we see this setup, I would not play this as a swing trading long. Meaning, I will not hold for a few days, since what is needed for a bottom is not yet in place. Rather I'll use the area as a reference point where the intra-day time frame will bottom and start a short-term uptrend. Historically, correction bottoms do not occur without the majority convinced that the market is going lower and they make speculative bets on that. We are not seeing that yet based those option traders that are typically on wrong side near turning points. These are the under-capitalized, overly-emotional traders that bet big at the worst time. I've used their actions at a guide for many years and they rarely fail to signal when the turn is near. When these traders start loading the boat with put options (bearish bets) the odds are that a tradable low will not be far off. Lastly, let's look at the NASDAQ 100 index ETF symbol QQQ In the above chart is a Head & Shoulders pattern that formed in the NASDAQ 100 ETF symbol QQQ. The pattern is simply a new high that has failed (longs are caught) and break of prior support. I typically don't show or talk about the esoteric types of analysis that I studied in the past. However, I thought I would show this and how it aligns with the simple technique taught at Pristine. The Head & Shoulders top theory is that the vertical length of the area between the head of the pattern and the neckline (the base) will give you the point where prices will decline to by projecting the same length below the base. In the chart, you can see that I've drawn a line from the head to the base and then placed a line of equal length from the base going lower. That is where prices should decline to. Well, based on the simple analysis of what was resistance becomes support, we see that the Minor Support (mS) area is the same as the measured low projection. I studied this many times years ago and it was virtually always the same. The projection lined up with an area of price support; it could be a minor or major area. The other lines below are simply other price support reference points to be aware of should the decline continue lower. Complex analysis tends to impress us when starting to learn about trading based on technical analysis. We are conditioned to think that the markets are complex and it's needed. Most online trading courses are based on this type of analysis. If you have to buy software or indicators to trade be wary of such education. If your charts of filled with things like indicators, wave counts, Fibonacci projections, etc. The only thing you can be sure of is that the confusion will continue. All the best, Greg Capra President & CEO Pristine Capital Holdings, Inc.
