barney said:
Hi guys, Two reasons for this post; Firstly to see if I can get the chart on the screen, and secondly it is a good example of a downward breakout (short term ) (thats how I would describe it anyway) , and a good opportunity to get feedback from the experienced members on the forum on the opinions of a "novice" in "training"
What I see/know about the stock, and why I would/will be "watching" it over the next few days/ weeks;
1) Just had a downgrade of resource at current mining op. (1 third)New mine has been commissioned to produce starting this month I believe. Fundamentals of the Co. basically unchanged apart from that.
2)Large SP drop on big volume (initial spike has eased, volume decreasing slightly, and the spread of the SP has lessened) ........... Indicates to me further drop is likely, but looks to be slowing.
3) Old support area of around $1.35 will now become the point of resistance against the Sp rebounding, but imo this will be a "weak" POR due to the small amount of time/ volume the SP traded in this area. 2nd and third POR's also very weak, which indicates to me, that if/when the SP does reverse, it should have little trouble rebounding strongly.
I would be looking to "possibly" trade this stock in the future if I get confirmation of a positive reversal after the current downtrend has proven to be over. Imo this will most likely happen because the size of the downtrend seems to be an "over reaction" to the news recieved.
Gold prices, (according to those that know more than myself) are tipped to be
a good "long term" investment, so, if this Co. has a resource upgrade (which the management indicates is likely in the future), I could imagine the SP returning to much higher prices.
Of course, if the SP does not reverse. or simply "stagnates" at its new lower level, then no trade would be considered.
Hope the charts "post up" ............... Any opinions and constructive comments/criticisms appreciated ............... Thanks, Barney
( PS The second POR was off the left of screen at about $1.45 ; also short time span.)
Hi barney,
You late night bandit you!
Looking at your chart gives me a headache. It looks like spaghetti. How you can see anything beats me. Agree with Snake and Michael here, there’s way too much going on.
Remember what I said about gizmo’s obscuring the chart? Well this one is so busy with lines everywhere even I had to struggle to mentally filter them out when I was looking at your chart. I can’t help but feel it has to be even more distracting for you since you’re new to this.
Ok, in my view, most people don’t know how to use moving averages effectively at the best of times (of course there are some people on this forum who do). They are a lagging indicator, and in many cases in my view tell you what is happening well after the event has happened, and what the chart was telling you was a probability if you cared to look at it and not the indicator at the time.
In strongly trending markets, this is not so much of a problem, the main trend is easy to see, and if you take longer term trades, you can do quite nicely without much angst, even using moving averages.
In consolidating and creeping markets this all changes, and moving average/oscillator based traders who don’t understand how to use these indicators get whipsawed in and out of trades – the death of 1000 cuts.
Moving averages used the wavepicker uses them in my view is an effective use – he displaces them and ties them into cycle analysis (very important in resource stocks).
Distribution:
Ok, the concept about distribution is that the smart money is exiting in an orderly fashion, and don’t want to upset the price too much as they exit taking profits or reducing exposure, or transferring capital to a different prospect, prior to a sell off of the underlying.
Snake is talking about pattern analysis, and he’s seeing a pattern that he’s interpreting as distribution – the smart money selling off in an orderly fashion before a sell off. When you get a consolidation pattern this often precedes a decline, often a fast and sharp one, hence if this is your view, these present great shorting opportunities.
Broad Market Influences:
Now, there is some danger in looking at the materials index at the moment in isolation. Resources are driven by commodities. If you’re going to trade resource stocks, you have to be aware of the markets that affect them. So, you need to be aware of which metal futures or oil, or gold, are relevant. Then you need to be aware of currency movements.
I remember a trading colleague and I went long LHG a few years ago purely from a bullish gold chart, only to see LHG move down. We couldn’t figure this out at first, but then I realised I hadn’t done my due diligence, and forgot to include currency movements. The US dollar was falling faster than gold was going up, so in net terms, the value to LHG was going DOWN, not up! Just think about these kinds of things when you’re doing your analysis.
If you look at JBM recently, why do you think this has been so bullish? Look at the nickel futures and compare it with other metals (particularly copper). Nickel has been very bullish of late, and the USD has been strengthening. What do you think this might do to the market perception? Of course you could just trade the JBM chart, but watching the relevant commodities and currencies may give you an early warning of opportunities and threats.
I think it is great what you are doing by the way. Saying what you see, then thinking about other perspectives. A great way to learn. But be patient, and filter the many views, and take what you can see. It takes time to learn how to read charts believe me. You never really stop learning.
Regards
Magdoran
P.S. How’s the guitar!