Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Recommended Posts

n a prior Chart of the Week (COTW) titled Bringing Common Sense to Trading Part I, I explained how to determine turning points and continuation points with price action alone. This week I am going to show why prices trended as they did Friday.

 

In that prior COTW, I also told you that price oscillators, various other indicators and drawing lines to determine turning points or support and resistance have nothing to do with prices reversing when they do. Friday's drop should reinforce that fact for you. To an extent, these analysis tools do have a self-fulfilling prophecy at times since so many people have been taught to believe the fallacy and use them.

 

The internet based online trading education industry perpetuates these hocus-pocus indicator based methods. Not much has changed over the years. When I started to learn about trading the markets there was no online education, since there was no internet. However, there were mailed letters that gave recommendations and some education. Like most online educators now, those letters also used the indicator mythology.

 

It's not easy getting started with so much information to sift through about how to use these types of technical analysis to trade and invest. I did not side-step the learning and use of indicators, but I did eventually see the truth. Through these COTW letters and our other services I hope you will see through these deceptions that create confusion about price movement.

 

Okay, let me explain what happened on Friday.

 

GetChart.aspx?PlayID=66663

 

Before we get to Friday, above is a chart that I posted at the Pristine Facebook Fan Page and the Group Page last Wednesday. In it I showed why sellers would show up the next day, and they did. I also said that ES (ES is the e-mini contract for the S&P 500) retraced further than I thought it would, but those Topping Tails (TT) suggest that short-sellers are waiting to pound it again. This alone did not suggest or predict how much prices would fall on Friday. However, what made that possible was the way prices moved up to the area of the prior TTs.

 

The key here is the fact that there is virtually no overlapping of the candles on the way up. Each candle started at or very near the prior candle close and did not retrace back into the prior candle. In other words, this is a continuous fluid movement. There is no uncertainty among the majority traders. Prices are going up; buy or get out of the way!

 

This arrangement of candles displays strength, power and momentum. But if that is the case, how could prices fall as far and as hard as they did? While this arrangement of candles does display strength, it is the weakest link also. As I have explained in the past, one of the most powerful concepts to understand is that of supply and demand. Where sellers and buyers are and when there is a Void of them.

 

The way prices moved up into the supply area and the TTs (little to no overlap between candles) it created what I refer to as a Pristine Price Void (PPV). When prices move upward so fast there is no support under prices. There are no pullbacks or sideways consolidations. So there is nowhere to buy a pullback based on a price support as a reference point (demand area). There is a Void of support or demand because prices moved higher so fast. In addition, as current prices move sideways over time they move away from any small support area that might be there. This makes any small support area irrelevant.

 

This is a common question students have. What about that small area of price support? What is more powerful or meaningful, that small area of consolidation or the bearish daily time frame and intra-day bearish shock? It's the weight of the evidence to consider as a whole, not one piece of information.

 

Pristine Tip: A truly strong momentum move does not need support. It creates it. I discussed this in the COTW Bringing Common Sense to Trading Part I. Look for momentum moves that begin from a consolidation and have a PVV overhead. Not moves that end at the top of a range.

 

GetChart.aspx?PlayID=66664

 

In the chart above, I've shown the daily time frame at the upper left and the 60-min. time frame. In the 60-min. you can see how little congestion (stall in prices moving higher) there is, especially on the Tuesday the 16th. As prices moved sideways and away from what little intra-day overlapping there was, it made those areas less relevant as a reference point of support.

 

The essence of a Head and Shoulders top is that the upward move has ended when the new high fails (the head) and that the time moving sideways (the Shoulders) signals distribution. That price pattern creates a Void below. Also in this example, there is a shock that occurred on the 18th and confirmed the bearishness of the bigger daily picture.

 

GetChart.aspx?PlayID=66665

 

Let's assume that you had no idea of the bearish big picture and potential for the larger decline. It's conceivable that you could have thought that prices have fallen a lot and would bounce on Friday and looked for long trades. Well that's fine, but unless the price action becomes climactic near a prior support area or there is an actual trend change on the time frame being traded (in this case the 5-min.), there would be no objective reason to buy. This is a rule all Pristine students and prop traders are taught from the start. Include it into your trading plan and it will eliminate a lot of unnecessary loses.

 

I hope this COTW has helped you understand why prices moved as they did on Friday and see that the commonplace indicator based mythology is unnecessary and misleading.

 

I will be presenting a Free Workshop on Tuesday October 30th. At it I will be discussing what we covered today and other Pristine trading strategies. It will be similar to the coaching sessions I do with students and hope to talk to you there.

All the best,

 

Greg Capra

President & CEO

Pristine Capital Holdings, Inc.

pristine-logo-small.jpg

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

  • Topics

  • Posts

    • $CSCO Cisco Systems stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?CSCOSEPN Septerna stock watch for a bottom breakout, good upside price gap
    • $CSCO Cisco Systems stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?CSCOSEPN Septerna stock watch for a bottom breakout, good upside price gap
    • MNST Monster Beverage stock, top of range breakout above 60.45, from Stocks to Watch at https://stockconsultant.com/?MNST
    • ...hallucinates.... Student: “What if we gave the monkey LSD?” Guru: “The monkey already did LSD”
    • Question: To those that had/have cancer, what were the signs that made you think “something is not right here” to make you go see a doctor? Answer: So, 5/25/2018, I woke up, got ready for work, and as I walked to my car, I started gagging. Like something was stuck in my throat and I needed to clear it. And then it went away.   But 10 minutes after that, I was T-boned at 40mph on the driver side door. But what made me see a doctor was while my muscles felt better and bruises were going away, the gagging still continued, I started having fevers, my neck felt swollen, I was having such a hard time breathing, and I'd have random sharp pains in my chest, but not from where the seat belt saved me.   2 weeks after the accident, I finally see an urgent care doctor, who looks me over, tells me I'm fine, but luckily requests a neck X-ray. And I ask for a chest X-ray, which he rolls his eyes but let me have (most of my pain was in the neck, so I understand).   The very next day, he calls and says “So, that chest X-ray shows there's a 4 inch mass on your heart and lungs, and your lungs have been filling up with fluid, as well as in your pericardial (heart) wall. We need you to come in tomorrow.”   Turns out the big mass, due to the accident, caused my heart and lungs to tear and fill with fluid, the swollen neck and gagging was caused by 2 metastasized tumors, and the fevers and weight loss were symptoms. Stage 4b Hodgkin's Lymphoma.   But thankfully, we went very aggressive with chemo (and had a lot of bad side effects that don't normally happen to patients), and now I'm about 16 months cancer-free. Yay lucky X-rays! Rachel Jurina, Quora Source: https://www.quora.com/To-those-that-had-have-cancer-what-were-the-signs-that-made-you-think-something-is-not-right-here-to-make-you-go-see-a-doctor   Profits from free accurate cryptos signals: https://www.predictmag.com/  
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.